Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

PRIVATE BUSINESS

CITY OF LONDON (WARD ELECTIONS) BILL (By Order)

Order for further consideration, as amended, read.

To be considered on Tuesday 19 October.

Oral Answers to Questions — SCOTLAND

The Secretary of State was asked—

Liaison Arrangements

Mr. Michael Fabricant: If he will make a statement on the operation of the substantive liaison arrangements between the Government and the Scottish Executive. [91598]

The Secretary of State for Scotland (Dr. John Reid): Liaison arrangements will be set out in concordats which will guide working relations between the United Kingdom Government and the Scottish Executive on a range of matters.

Mr. Fabricant: I wonder whether, when the Secretary of State says that the arrangements "will be" set out in concordats, he means that the concordats do not exist. Is that why there is so much confusion between his powers and those of the First Minister? Is that why, in the past two weeks, there have been so many turf wars between him and the Scottish First Minister?

Dr. Reid: The concordats will be published once they have been agreed by the Scottish Executive and the Government. I can tell the hon. Gentleman that the concordats do exist. They are there to promote concord between the two Parliaments in their working relationships.
I am very sorry that the Opposition, including the Scottish National party and the Tories, have failed in their 20-year struggle to stop devolution, but the Scottish Parliament has been established; there is now a partnership of Parliaments; and it will succeed to the benefit of the Scottish people.

Mr. Ernie Ross: Does my right hon. Friend agree that if changes are to be made to the way

in which Parliament operates they should be made on a considered basis, not on the basis of a narrow, populist appeal to English nationalism?

Dr. Reid: Yes. As my hon. Friend knows, those of us who have promoted the devolution settlement have spent most of our political life arguing for the unity of the United Kingdom and against the separatists and their narrow brand of nationalism. Unfortunately, the mirror image of that narrow brand of Scottish nationalism seems to be creeping into the leadership of the Conservative party, which is fanning the flames of English nationalism.
Of course, in the wake of the devolution settlement, we shall have to change the superstructure. We are considering how we deal with matters in this House. Of course we shall reduce the number of Scottish Members of Parliament. Of course we shall consider, once the Parliament and devolved legislatures have settled in, the role of the Secretary of State.
However, the one area that we should be very careful about tampering with is the essence of the unity of the United Kingdom, and that is ensuring that every Member of Parliament in this House is equal and stays equal.

Mr. Michael Moore: In the annual report published by the Government yesterday there is a reference to unease at devolution. Does the Secretary of State accept that some of that unease is occurring because of an apparent turf war between his new Scotland Office and the Scottish Executive? Does he maintain, as he did at last week's Scottish Affairs Committee, that this is an entirely media-inspired turf war, or does he think that it is about time that politicians at all levels reversed the tanks off one other's lawns?

Dr. Reid: The unease that was referred to in the report—I take it that the hon. Gentleman has read the report, not just the media reports of it—was the potential unease among those people who might see the most radical constitutional steps for three centuries taking place and wonder whether Scotland might fall under the hands of the incompetent narrow nationalists who sit on the Benches behind him. I can assure him that he can be well at ease on that basis. We have no intention—nor have the Scottish people—of allowing Scotland to be divorced from the United Kingdom.
As regards the relationships between this Parliament and the Scottish Parliament, I can assure the hon. Gentleman that there will be a partnership of Parliaments. They are united by the Labour Government leading here at Westminster and the Labour-led Administration in partnership in Holyrood.

Mr. John Home Robertson: When my right hon. Friend next meets a member of the Scottish Executive, will he express his support for the stated intention of our right hon. Friend the Member for Glasgow, Anniesland (Mr. Dewar) to go on fighting against all forms of small-minded nationalism for as long as it takes? When he meets the First Minister, will he pass on some advice—that there is nothing like the prospect of a reshuffle to concentrate the loyalty of all and sundry?

Dr. Reid: I can assure my hon. Friend that nothing is further from my mind than a reshuffle. As regards the


recent speculation, I think that we would all be wise to remember exactly what is happening. For nearly two decades, there has been an alliance of forces against the devolution settlement. That settlement is the partnership of Parliaments. When we hear the names of Forsyth, Tebbit, Hague and the SNP, we recall that they have spent most of the last 20 years arguing against the establishment of one part of that settlement: the Scottish Parliament. They have utterly failed to stop that, and they are now directing their attack towards the other half of the settlement: Scottish partnership in the United Kingdom at the UK parliamentary level. We will not allow them to succeed in that attack, nor will the Scottish people. The partnership of Parliaments will succeed.

Mr. Alasdair Morgan: In his liaison role with the Scottish Executive, will the Secretary of State discuss the remarks made yesterday by the First Minister's official spokesman to the effect that the other Ministers in the Scottish Executive are unproven and unqualified? Does he agree that Scotland would be better served by less spin of that kind and a little more action?

Dr. Reid: Matters concerning Scottish Ministers are for the Scottish Parliament. Let me tell the hon. Gentleman how the Scottish people would be better served. Instead of the leader and parliamentary leader of his party putting in no appearance in this House, voting on nothing in this House, and asking no questions in this House, even during the period when the Scottish Parliament has not been sitting, SNP Members should stop taking money from a Parliament in which they do not believe, for what they are not doing.

Mr. Andrew Mackinlay: Although it is recognised that some issues relating to the economy and infrastructure are the legitimate business both of Members of this Parliament and of Members of the Scottish Parliament, what guidance has been given to my right hon. Friend's colleagues in government regarding representations that might be made by SMPs in relation to such matters as the Child Support Agency and immigration, which should be jealously guarded as the locus and jurisdiction of Members of the Parliament here at Westminster, and should not be the business of SMPs—[HON. MEMBERS: "SMPs?"]—Members of the Scottish Parliament? Can my right hon. Friend clarify the line of responsibility and tell us what advice has been given to his colleagues in government concerning their response to such representations?

Dr. Reid: As I said earlier, there is genuinely a partnership of Parliaments. It is the most radical constitutional settlement for 300 years. There is no route map for it, and no textbook that we can consult. However, I assure my hon. Friend that the First Minister and I are already involved in discussions to see that there is a symmetry of conventions. [HON. MEMBERS: "What does that mean?"] It means that both sides have equal rights and responsibilities. I am sorry that we have to explain such things in words of one syllable to those on the Opposition Front Bench. The rights and responsibilities of each Parliament will be respected. I am sure that we will work for the ultimate benefit of the Scottish people, because I believe that the partnership not only gives them

more control over their own affairs in Scotland, but solidifies their partnership in the United Kingdom in a way that has never been done before.

Mr. Dominic Grieve: May I assure the Secretary of State that when it comes to concord, we certainly desire it? Is it not the case, however, that the concord between him and the First Minister over the past few weeks has been somewhat subsonic? Has not the only means of communication between the Secretary of State and the First Minister been through the parliamentary Labour party—not a source of brotherly love and affection? Why are no concordats in place now, when the relationship should be up and running? Is the Secretary of State privy, for instance, to the internal paper round of the Scottish Executive? If not, is he not effectively cut out of all contact with decision making, save that which the First Minister wishes to give him? Is it not time to get away from the turf wars and lay some proper and open foundations for the relationship?

Dr. Reid: Last week, apparently, Mr. McLetchie—who purports to lead the rump of the Conservative party in Scotland and is doing his best to disrupt the link between Scotland and the Union, which may be of interest to the hon. Gentleman—claimed that I was too powerful. The claim from the Opposition today is that I am not powerful enough. Once they have sorted out their line on my status, I shall respond to the hon. Gentleman's question.
On the concordats, the reason for the delay, as I explained in great detail to the Select Committee, is that they are inextricably linked to the memorandum of understanding. The memorandum of understanding is not between one Administration—the Scottish Executive—and the Government. It is between all devolved Administrations and all Departments of Government—including the Secretary of State for Northern Ireland and the proposed devolved Assembly there. It may have escaped the hon. Gentleman's notice that there has been some difficulty in recent weeks in reaching the final decision on the Irish situation. That is the main reason for the delay. There is no conspiracy.
I would merely make one further point. The hon. Gentleman and the SNP like to dwell on personalities, which is a sure sign that they have nothing whatever to say on policy, and the longer they deal in soap-opera politics, the more obvious to the Scottish people that fact will become.

Reserved Powers

Mr. Tom Clarke: If he will publish a guide for the public on the reserved powers relevant to Scottish matters and how they are dealt with in the House. [91599]

The Secretary of State for Scotland (Dr. John Reid): A range of important issues are reserved to the UK Government. Many of those are of crucial importance to ordinary people's day-to-day lives in Scotland—for instance, employment and taxation policies, social security benefits, occupational and personal pensions and the new deal. That is why, before the devolution referendum, each household in Scotland received a leaflet


summarising the reserved and devolved matters. Further information was issued ahead of the 6 May 1999 elections.

Mr. Clarke: Despite the confusion that the chattering classes have sown in the Scottish media, I welcome what my right hon. Friend says about issues such as taxation, social security and other matters which remain the clear responsibility of this House. Given that Government policy and the reserved powers that we have retained and their impact on the daily lives of all the Scottish people are of supreme importance, will he continue to reassure the Scottish people that this Parliament will protect their interests, working in partnership, but very much a part of the United Kingdom?

Dr. Reid: Yes, I can assure my right hon. Friend of that, and I can also assure the Scottish people that Labour Members of Parliament from Scotland will be here to involve themselves in ensuring that their interests are protected. When the people of Scotland listen to the criticisms that have been levelled by the leader of the Scottish National party and its parliamentary leader—[HON. MEMBERS: "Where are they?"] I see that the leader of the SNP is not here today again. As that hon. Gentleman is so interested in my role, I checked how many times since 2 July he had asked a question in the House—remember, this is when the Scottish Parliament is not sitting—and the answer was none at all. I checked how many times he had taken part in a debate, and the answer was none at all. And I checked how many times he had voted, and up until yesterday morning the answer was none at all—and I suspect that after the past 24 hours, it is none at all again. As I have said, people will want to ask what, exactly, moneys, allowances and Short money from this Parliament are being paid to the SNP for, since SNP Members are taking money from a Parliament in which they do not believe for something that they are not doing.

Mr. Michael Fallon: Will the Secretary of State confirm that he has reserved for himself 200 civil servants and a new official residence in Edinburgh, and that he has creamed £5 million off the Scottish block to be spent at his personal discretion? Why should the English taxpayer have to featherbed all that empire building in Edinburgh and overlapping extravagance between two of the Queen's rival Ministers?

Dr. Reid: The hon. Gentleman lives up to the Tory slogan, "Never get one thing wrong when you can get three wrong." First, I have not reserved to myself 200 civil servants. At the moment I have 50 and I may have more than 100 at the end of the day, compared with 4,200 for the Scottish Parliament. I have heard that called empire building, but it will surely be the first empire where the leader will know each member by his or her first name. Secondly, I have rejected the idea of a separate residence, and that is precisely why I have authorised negotiations on offices in Edinburgh where 20 of the 26 rooms will be allocated to civil servants. I did not want a separate residence. Ill-tutored though the hon. Gentleman may be from his reading of the English papers, he does not improve himself by reading some of the Scottish papers.

Dr. Norman A. Godman: My right hon. Friend the Member for Coatbridge and

Chryston (Mr. Clarke) raises an important issue concerning the education of the public not only in relation to our powers and his powers but in relation to the powers of other elected representatives and the matters best dealt with by them. Are not constituents occasionally a little confused about the respective responsibilities of elected representatives? Do we not therefore owe it to them to provide them with information about who is the best representative to approach with a problem concerning the CSA, the social security system or whatever?

Dr. Reid: My hon. Friend is right. I have never said that there is a simple solution to all those problems. We have to consider the fact that more guidance might be necessary, but, if we are in the world of grown-up politics, we should realise that we cannot carry out constitutional change of such magnitude without having to work through problems. The First Minister and I are attempting to do that—in a businesslike fashion and in partnership. I believe that that partnership is immensely beneficial to the Scottish people and it is certainly their preference. The one thing they want is people working together in partnership; the one thing they oppose is divorcing Scotland from the United Kingdom.

Mr. Andrew Welsh: The Secretary of State's Department has fewer responsibilities than at any time in its history, so why is he amassing an army of up to 130 civil servants with an annual budget of £5 million taken from the Scottish Parliament, which could be better spent by it in providing services for the Scottish people? Why is he undermining his own Government's devolution settlement while Scottish Executive Ministers are openly and publicly squabbling among themselves?

Dr. Reid: With great respect, may I list the military hierarchy for the hon. Gentleman? An army consists of several thousand people, which is what the Scottish Parliament has. Beneath that is the brigade, which I do not have. Beneath that is the battalion, which I do not have. Beneath that is the regiment, which I do not have. Beneath that is the company, which is what I have. My company consists of about 100 people. The hon. Gentleman seems to be concerned about expense and the £5 million, but he obviously did not notice that all the details were issued by the Treasury on 31 March. They were available to him but, like his colleagues, he was probably not here. If the SNP spent a little bit of time working for its money, it would have been able to find out about these matters. The £5 million to which he refers is 0.03 per cent. of the Scottish Office budget.
Let us consider what the SNP is receiving. I do not mind the hon. Gentleman taking two salaries and two parliamentary allowances, if he does so, but I know—[Interruption.] He may not, but I know that the SNP takes two lots of Short money: £134,000 here and £170,000 in the Scottish Parliament. In addition, it voted itself another £1 million in allowances at Scottish parliamentary level. If SNP Members are taking that sort of money, they should do some work here occasionally to represent the interests of the Scottish people.

Sir Patrick Cormack: The right hon. Gentleman, who was such a marvellous Minister for the Armed Forces, should not allow himself to become so tetchy merely because he is now a member of a


partnership more improbable than any since Fox and North. For the benefit of everyone concerned, will he devote a little time during the forthcoming recess to compiling a list of those matters for which he is responsible as Secretary of State? He read out a great litany from the Dispatch Box during the last Scottish Question Time, but he was responsible for not one of those matters. We want to know what he is doing for his money.

Dr. Reid: The reference to North and Fox reminds me that we should keep off the subject of foxes in the present context because other people will get tetchy. I was not at all tetchy. If the hon. Gentleman wants me to go through the whole list again I shall do so, but I suspect that he does not. My main role in the House is to represent the interests of the Scottish people in all the reserved matters, which he well knows. My other role is to promote the devolution settlement. I have to play a part in negotiations on payment of the block grant and I also have some residual functions. As the hon. Gentleman well knows, the nature of collective government means that it is important for Scotland to have its interests represented in Cabinet discussions on such matters, and for the position of the Scottish people to be made clear. If the hon. Gentleman tells me that, logically, no one who does not have to make the ultimate departmental decision for anything can play an important role, I would remind him that the total departmental role of the Prime Minister is national security and honours. I hope that he would not suggest that the Prime Minister has no authority or power.

Regional Air Services

Mr. David Stewart: What discussions he has had on the role of regional air services between Scotland and London in encouraging economic development. [91600]

The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald): I have had no such discussions recently, but I am well aware of my hon. Friend's concern, and my right hon. Friend keeps closely in touch with developments in this area.

Mr. Stewart: The Minister will be aware that, today, the Government announced that British Airways can acquire the City Flyer Aviation Company, with the proviso that it gives up slots at Gatwick. He will also be aware of the great problem, at both Gatwick and Heathrow, in providing slots for vital regional services, which are essential for business and tourism. Will he agree to make representations to the Minister for Transport to fight for those slots at Gatwick and Heathrow for vital regional services, such as the Inverness-London route?

Mr. Macdonald: My hon. Friend is well aware of the difficulty surrounding this issue, which is that we have to work within the context of European regulations. We fully recognise the need for the good links that he describes, which is why the Government have commissioned a special study on Scottish airports and aviation, and another study specifically on the links between Inverness

and London. I shall pass on my hon. Friend's representations to my right hon. Friend the Minister for Transport.

Miss Anne McIntosh: Does the Minister share my concern that the chairman of Highlands and Islands airport has said that services can be secured from Scottish airports only for people living in Glasgow and Edinburgh? If so, what does he intend to do about it?

Mr. Macdonald: The hon. Lady might be quoting that gentleman slightly out of context. The key point that Mr. Grant was trying to make was that there is concern that the good service between Inverness and Gatwick will be upgraded so that it goes directly to Heathrow, but that that should not be seen as a reflection on the good service that already exists between Inverness and London.

Miss Anne Begg: The air links between Aberdeen and Heathrow are vital to the oil industry. Will my hon. Friend ensure that there is no diminution in the frequency of flights from Aberdeen into Heathrow, or in the volume of the service?

Mr. Macdonald: These are commercial matters for the airlines involved. However, we fully recognise the importance of the links between Aberdeen and elsewhere in the United Kingdom, not just for industry and business connections but for ordinary passengers and tourism to that part of Scotland.

Mr. Menzies Campbell: Does the Minister recognise that the growth of regional services of that kind depends on economic confidence but also on the confidence of operators and passengers in air safety? In any discussions that he has, will he do his best to resist the Government's half-baked proposals on National Air Traffic Services?

Mr. Macdonald: The Government's proposals are designed to attract new investment to the air traffic control system and, therefore, to improve services and air safety. I hope that the right hon. and learned Gentleman will welcome the fact that, as a result of the Government's approach in tackling these issues on a United Kingdom basis, we shall have two centres, one of which will be in Scotland. Were we in the situation that the nationalists would want, with separate states in the UK, we would not have the benefit of a centre in Scotland providing jobs in Scotland.

Economy

Mr. Russell Brown: What discussions he had with the Chancellor of the Exchequer on the impact of the Budget on the Scottish economy. [91601]

The Secretary of State for Scotland (Dr. John Reid): I shall discuss that matter with the Chancellor as necessary to ensure that his outstanding management of the United Kingdom economy continues to benefit Scotland, as it has done over the past two years.

Mr. Brown: I thank the Secretary of State for his reply. He will be fully aware that the working families tax credit will be introduced in October. How many Scottish


families will benefit from that measure? Will he make representations to the Chancellor to ensure that families in Scotland are aware of this valuable means of tackling poverty?

Dr. Reid: I commend to the House and to people in Scotland the working families tax credit which the Chancellor intends to introduce. This is another major step forward in ensuring that our economic competence is matched by social justice. More than 140,000 families in Scotland will benefit, with a minimum wage of £200 per week for families with one worker. That is part of our fight for social justice in Scotland, and is in addition to the 200,000 people who benefit from the minimum wage, the £1.8 billion extra on the health service, the £1.3 billion extra going into education, the lowest rate of inflation, mortgages and interest rates that we have had for a long time, and the lowest rate of unemployment in Scotland for 20 years. That is testimony to the competence of the Chancellor and the Government, and is the necessary platform to ensure that the lives of people in Scotland will improve year by year under the Labour Government in partnership with the Labour-led Administration in Edinburgh.

Mr. David Prior: If the economy in Scotland is being managed so successfully, why are class sizes and waiting lists increasing?

Dr. Reid: The hon. Gentleman is trying to surpass his hon. Friend the Member for Sevenoaks (Mr. Fallon) in getting facts wrong. He may have misread yesterday's press. The Labour Government's first target for Scotland was to deliver the Parliament, which we have done; the second was economic stability, and he will be aware that we have achieved that; and the third was to reduce waiting lists to below 75,000 by 2002. I am pleased that the hon. Gentleman has given me the opportunity to tell the House that we met that target two and a half years ahead of schedule when, one month ago, we reduced waiting lists in Scotland to below 75,000.

Ms Rachel Squire: Does my right hon. Friend agree that tackling low pay and family poverty has been a priority for the Government, unlike the previous Government, who believed that no income level was too low for a family to live on as long as it did not affect them or their supporters? Does he also agree that the minimum wage and the working families tax credit—both introduced this year—will lift thousands of Scottish families out of poverty? Those measures will start to end the national disgrace that we inherited from the previous Government which is that, at the end of the 20th century, one in four children are still living in poverty.

Dr. Reid: I agree with my hon. Friend. There is no greater blight on a civilised society than poverty in families and among children and our senior citizens. That is why I am proud that the Chancellor's custodianship of our economy has allowed people in Scotland the biggest-ever increase in child benefit. I am also proud that we were able to increase the Christmas bonus for pensioners to £100, and that, in addition to the minimum wage, which has lifted hundreds of thousands in Scotland above their previous position, the working families tax credit will benefit 140,000 more families in Scotland,

including a considerable number of children. For old folks, families and young people in Scotland, the Labour Government are beginning to make life better than it ever was before.

Regional Aid

Mr. Archy Kirkwood: When he expects to announce the areas in Scotland to be included in the next programme of (a) regional development area aid and (b) European structural funds; and if he will make a statement. [91602]

The Secretary of State for Scotland (Dr. John Reid): The proposals for a new assisted areas map, including parts of the borders, were announced on 15 July. The safety net for the United Kingdom's coverage secured by the Prime Minister at the Berlin summit enabled the UK Government to propose that 49 per cent. of Scotland's population should be covered by the new map.
As regards objective 2 of the European structural funds, it is important to target the areas to be nominated. Finalising these areas is taking slightly longer than anticipated, but every effort is being made to do so as soon as possible.

Mr. Kirkwood: The reintroduction of regional selective assistance in parts of the Scottish borders region on 15 July was warmly welcomed. However, as I am sure the Secretary of State will acknowledge, not every community in the region can be included in the eligible area map. That puts extra pressure on communities such as Jedburgh in my constituency which have been left out. The local people are perplexed about that, and feel that no one is responding to their needs.
When the European structural funds announcement on objective 2 is made, will the Secretary of State bear that in mind? Will he ensure that the whole Scottish borders region receives some coverage, so that compensating measures can be applied to communities that have not been given assisted area status? Will he also use all his powers to ensure that Members of Parliament are given adequate notice of the announcement, which will probably be made during the recess, and that we do not have to read about it in the newspapers?

Dr. Reid: I will try to ensure that the hon. Gentleman's last request is met to the benefit of hon. Members.
I thank the hon. Gentleman for his comments about the assisted areas map. I think that the solution for Scotland was a fair one, which met Scotland's needs and resulted from the very partnership that I mentioned earlier. Not only did the Prime Minister negotiate a safety net for the United Kingdom, but I assure the hon. Gentleman that the First Minister and I worked closely together. I think that the resulting 49 per cent. coverage was very fair. We should bear in mind that the United Kingdom is now much more prosperous than it was in Europe when the last map was drawn up, and that, owing to the present Government's policies, Scotland is now much more prosperous in the United Kingdom than it was. As I say, I think that the settlement was fair.
As for objective 2, I cannot give the hon. Gentleman guarantees in regard to areas. We must ensure that the method of targeting is as efficient as possible. Because


we are now more prosperous, we can expect a diminution in the number of people who will be covered in Scotland. I will, however, attempt to ensure that the hon. Gentleman's comments are brought to the attention of all who are involved in the planning.

Mr. Douglas Alexander: I welcome the world-based approach to regional selective assistance, but would the Secretary of State be willing to meet me to discuss the impact of the new approach on my constituency?

Dr. Reid: My hon. Friend has already raised the matter with me informally, and had the courtesy to tell me that he would ask me about it today. I know how keen he is to ensure that the interests of the people of Paisley are protected. I will certainly meet him but, as I think he will accept, the settlement regarding the assisted areas map was very fair from our point of view. We worked it out in partnership with our colleagues in the United Kingdom Parliament.
When a final announcement is made, it will be possible to make some technical adjustments to the map, but I do not hold out the probability of major adjustments.

Websites

Mr. Paul Flynn: If he will set up new websites for Government information on constitutional changes affecting Scotland. [91603]

The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald): We are in the process of establishing a new website designed to illustrate the work of the Department. In addition, information on devolved matters is available on the Scottish Executive website.

Mr. Flynn: I am delighted that my question resulted in such swift action.
Will my hon. Friend assure us that the new website will be more engaging and more journalistic than many of the other Government websites? I do not know whether he had a chance to meet members of a group which is devoted to the cause of increasing use of the internet by the elderly, and which operates under the intriguing name Hairnet. They rightly argue that the elderly have most to gain from the increased use of the world wide web, along with those who are housebound, disabled or infirm. If those people can be introduced to the world wide web, they will have opportunities to roam the wonderful prairies of information and find out about things as exciting as the progress of the Scottish constitution.

Mr. Macdonald: I should be delighted to receive further information about Hairnet, or Airnet. The website that we are developing was intended to come into operation during the next couple of weeks, but we want to have another look at it with the aim of making it a wee bit more "jazzy"—more interactive, and more useful to those who we hope will use it. It will be particularly useful to the groups mentioned by my hon. Friend, but it will also be useful to those—not just in Scotland but

throughout the United Kingdom—who are interested in both the operation of the constitutional settlement and the specific work of the Scotland Office.

Mr. Dominic Grieve: I am delighted to hear that the Scotland Office website will come back into operation after the disappearance of the Scottish Office one. Can the Minister help the House a little?
In answer to an earlier question, the Secretary of State described some of his roles—a much more modest list than the one that he gave a month ago. Will the website tell us how he carries out his job? For example, is he privy to the paper round of the Scottish Executive? Is that how he obtains his information on the day-to-day running of Scotland? Will that be on the website?
In addition, will the website identify what all his staff—that small company—are actually doing, what their remit is, what Departments they are covering, and whether they are duplicating the roles of civil servants in London, or of civil servants within the Scottish Executive? Will all that go on the website so that we can all know exactly what is happening?

Mr. Macdonald: The hon. Gentleman seems to be making great play of the fact that we do not see every paper that passes round the Scottish Executive. He knows that that is the convention even within Whitehall: we do not have access to all the different papers that float around different Departments, either. Departments share papers with each other for specific purposes. The Scotland Executive shares information with us for a specific purpose as well—so that we can represent effectively the interests of the Scottish people within the United Kingdom Government, as my right hon. Friend the Secretary of State said.

Ministerial Responsibilities

Mr. Tam Dalyell: If he will list the matters in respect of which he has a shared role with the First Minister and the Scottish Executive. [91604]

The Secretary of State for Scotland (Dr. John Reid): My role is quite distinct from that of the First Minister and the Scottish Executive. My main responsibilities are to represent Scottish interests in reserved areas within the Government and to promote the devolution settlement to Scotland. In doing so, I am responsible to this Parliament. What I share with the First Minister is a common interest in promoting the well-being of Scotland within the UK.

Mr. Dalyell: In respect of the fire service—a part of the shared role—what response is there to the concerns of the Edinburgh fire master, Colin Cranston, about the future of progression core training at the fire service college at Moreton-in-Marsh?

Dr. Reid: As my hon. Friend will know, the future of the fire service college is a matter for my right hon. Friend the Secretary of State for the Home Department. However, he will take full account of the views expressed in the context of the prior options review of the college at Moreton-in-Marsh. I shall ensure that my hon. Friend's views and those of the fire master are passed on to the Home Secretary. I would not want the West


Moreton-in-Marsh question to become a running sore in this Parliament; I will therefore act on my hon. Friend's representations.

Mrs. Margaret Ewing: Given that responsibility for elements of transport are shared between here and the Scottish Parliament, when will the Government report on air links be published? When it is published, who will take the decision about regional air links: the Scottish Executive, the Scotland Office, as it is now known, the Department of Trade and Industry, or the Department of the Environment, Transport and the Regions?

Dr. Reid: I think that it will be the Department of the Environment, Transport and the Regions, but, of course, there will be input from me and the Department of Trade and Industry. As the hon. Lady will know, a full study of regional airports throughout the United Kingdom has been somewhat impeded by difficulties connected with the legal procedures at one particular event in one particular airport. Everyone has been very careful not to transgress in any way the situation as regards terminal 5, lest others could reopen the whole inquiry and stop the terminal, but progress has been made on the regional airport studies. I am sure that the my right hon. Friend Secretary of State for the Environment, Transport and the Regions will be as keen as anyone to get a final paper on the matter as soon as he possibly can.

Mr. Michael Connarty: On the issue of shared responsibility between the First Minister and the Secretary of State for Scotland, may I commend the Secretary of State on the way in which he has very firmly laid down a marker in asserting that Scottish constituencies will be vigorously represented—at least by Labour Members—in the United Kingdom Parliament? Will he also confirm that he will work with the First Minister in making it clear to all hon. Members that Scottish Members will continue to play a vital and vibrant part in the United Kingdom Parliament?

Dr. Reid: I can certainly reassure my hon. Friend on both points. First, I have no doubt at all about the vigour and energy that Members of this Parliament—particularly Labour Members from Scotland—will continue to bring to their task. Secondly, I assure him that, as I have been doing, I shall continue working closely and in a businesslike fashion with the First Minister for the benefit of the Scottish people. It goes without saying—but bears repeating—that the Scottish people are extremely well served in their First Minister. He is a man of outstanding integrity and commitment, and ranks with those who have done most to deliver the Scottish Parliament to the Scottish people.

Mr. Dominic Grieve: I am delighted to hear that the Secretary of State will be working closely with the First Minister. Will the Secretary of State explain whether it is he who will have the unhappy responsibility of putting a veto on inward investment into Scotland, were the Government to decide that such investment was undesirable, or will that responsibility fall to some other Minister at Westminster?

Dr. Reid: The matters to which the hon. Gentleman refers will be dealt with in the concordats that will be

agreed between the United Kingdom Government and the Scottish Parliament. The people of Scotland want no great advantages over any other part of the United Kingdom, but fairness in the distribution of resources. I share that aim not only with the First Minister, but, I hope, with the hon. Gentleman himself.

Oral Answers to Questions — LORD CHANCELLOR'S DEPARTMENT

The Parliamentary Secretary was asked—

Leading Counsel

Mr. Andrew Dismore: If he will introduce measures to regulate the use and costs of leading counsel by litigants. [91628]

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Keith Vaz): The Government believe that litigants should be free to choose their advocate—whether barrister, solicitor or other authorised advocate. However, the new civil procedure rules specifically require the court awarding costs to have regard to what is proportionate to the issues at stake and the complexity of the particular case.

Mr. Dismore: Is my hon. Friend aware of the public disquiet over the high fees and restrictive practices endemic in the Queen's counsel system? Does he agree that the time has finally come to get rid of unnecessary double-manning; to pay QCs the rate for the job and not for their title; and to apply the new civil justice principle of equality of arms to advocacy, so that rich companies cannot buy themselves justice by hiring fat-cat QCs, whose services are out of reach of the pockets of their legally aided or conditional-fee funded opponents?

Mr. Vaz: I am aware of the concerns expressed by my hon. Friend and assure him that the new rules, which we know will be followed, are clear. I also assure him that the rank of QC is not only established but is a recognition of distinction that is conferred on senior barristers. If he believes that there is any scope for improvement in the system, the Government will, as always, be happy to listen to him. However, I am satisfied, and the Lord Chancellor is satisfied, that our procedures are proper and appropriate.

Mr. John Bercow: What was the cost to public funds of the use of leading counsel in financial year 1998–99? How does that figure compare with that of the immediately preceding year? What is the hon. Gentleman's best guesstimate of the likely outturn at the end of this financial year?

Mr. Vaz: I am afraid that I do not know the answer to those questions—if I am allowed to say that—but I shall write to the hon. Gentleman and give him all those figures in the detail that he requires.

Court Interpreters

Ms Gisela Stuart: What steps his Department has taken to monitor the quality of court interpreters. [91629]

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Keith Vaz): With effect from 1 April 1998, the Lord Chancellor's Department, with the magistrates courts, agreed to use interpreters from the national register of public service interpreters whenever possible. The register is administered by the Institute of Linguists, which is responsible for monitoring the quality of the interpreters on the register. In Crown and magistrates courts, the aim is to use only interpreters from the register by the end of 2001.
Tribunals also have an agreement with the Institute of Linguists for the provision of interpreters. With effect from September 1999, in-court assessments will be performed to ensure that interpreters maintain their standards.
In civil cases, it is the responsibility of the individual claimant or defendant to arrange and pay for an appropriately qualified interpreter for his or her own claim or defence.

Ms Stuart: I am grateful for that answer. I am sure that the Minister is aware of correspondence that I have had recently with the Birmingham legal interpreters' steering committee, which expressed its concerns about unqualified court interpreters being used in Crown court cases. That particular situation has been remedied. However, I am concerned that we should address the matter with some seriousness as the Youth Justice and Criminal Evidence Bill, which is making its way through the House, provides for the use of interpreters for witnesses and defendants who have hearing difficulties or a speech impairment. I should be grateful for some reassurance that the measures that apply to court interpreters will be extended to that group of people.

Mr. Vaz: Perhaps my hon. Friend, who speaks at least three other languages, should herself be on the national register. I am aware of the case that she has raised, as was the Department. We do not accept that it is right for interpreters to subcontract their work, which is what happened in that case. Of course it is important that we keep all these services under review, and the feedback from the judiciary and others in the court system will help us to maintain a proper register with all the relevant information. I can also assure my hon. Friend that the other points that she raised concerning the youth justice courts will be taken on board.

Scottish Parliament (Opening)

Mr. Tam Dalyell: If he will make a statement on the Lord Chancellor's visit to Edinburgh for the opening of the Scottish Parliament. [91630]

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Keith Vaz): The Lord Chancellor attended the opening of the Scottish Parliament in his capacity as Speaker of the House of Lords.

Mr. Dalyell: How does the Lord Chancellor define the phrase elegantly used by Madam Speaker, who referred to a "shared role" between Holyrood and Westminster?

Mr. Vaz: The Lord Chancellor and the Government welcome Madam Speaker's statement as providing helpful clarification for the House.

Mrs. Jacqui Lait: I wish that I could be so eloquent.
When the Lord Chancellor was in Scotland, did he examine the system of Scottish land tenure, and did he return to England determined to introduce at greater speed the system of commonhold—one of the two promises that the Prime Minister made on which no action has yet been taken?

Mr. Vaz: Unfortunately, the Lord Chancellor was extremely busy. He was unable to inspect the hon. Lady's estate and had to come straight back to London to deal with other business. The hon. Lady referred to commonhold, which of course is a manifesto commitment on which she will be hearing from the Government shortly.

Judiciary (Communication)

Mr. Nick St. Aubyn: If he will make a statement on the role of the Lord Chancellor in maintaining communication between the Government and the judiciary. [91631]

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Keith Vaz): It has long been recognised that the office of the Lord Chancellor is both a link between the Government and the judges, and a bulwark of judicial independence. The Lord Chancellor, as the responsible Minister, is accountable to Parliament, as the judges could not be, for the overall efficiency of the administration of justice. My noble and learned Friend the Lord Chancellor recently restated this in a speech to the third worldwide common law judiciary conference at Edinburgh on 5 July. I have put a copy of his speech in the Library.

Mr. St. Aubyn: In the first Session of this Parliament, the Lord Chancellor described himself as the Prime Minister's Cardinal Wolsey. He now says that he is the buffer between the Executive and the judiciary. Evidently he cannot perform both roles. If he cannot decide which role he is supposed to be performing, perhaps he should abolish his own position along with that of the other buffers in another place whose role he is abolishing on the grounds that they have no suitable function in the modern democratic age.

Mr. Vaz: I think that the phrase ascribed to the Lord Chancellor came not from him but from Miss Frances Gibb, a journalist with The Times. The office of Lord Chancellor carries great authority within the Government. It upholds judicial independence and can mediate between the Executive and the judiciary when necessary. The Lord Chancellor can perform that function because of his seniority in the Cabinet, because he is head of the judiciary and because he is so widely respected in the profession.

Mr. John Burnett: Will the Minister say whether, in the Lord Chancellor's communications with the judiciary, the subject of a


judicial appointments commission has been raised? What was the reaction of the judiciary to such a commission and how did it feel it should be constituted?

Mr. Vaz: I am sure that the hon. Gentleman will appreciate that I cannot disclose the conversations or correspondence between the Lord Chancellor and the judiciary, as these are matters of confidence. The Lord Chancellor, as he told the Select Committee on Home Affairs last year, has not ruled out a judicial appointments commission. It is not a priority at present, and he will make his mind up in due course.

Mr. Nick Hawkins: The Minister, in referring in his initial answer to my hon. Friend the Member for Guildford (Mr. St. Aubyn) to the Lord Chancellor's role as that of a bulwark, showed some sensitivity about the phrase which he ascribed to the distinguished legal correspondent of The Times. Whether bulwark or buffer, does not the Lord Chancellor recognise that perhaps his description of himself in his speech to that conference might be greeted by hollow laughter by many members of the legal profession who remember that the Lord Chancellor is perhaps the Prime Minister's oldest crony? Perhaps many members of the legal profession who traditionally have supported the Government party might nevertheless be concerned that this Lord Chancellor does not regard himself as the defender of the legal profession, but is very much in the Prime Minister's pocket.

Mr. Vaz: That is utter nonsense. The Lord Chancellor conducts the various duties of his high office with enormous dignity and integrity. The hon. Gentleman ought to know better.

Judiciary (Independence)

Sir Sydney Chapman: What steps the Lord Chancellor takes to ensure the political independence of the judiciary. [91632]

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Keith Vaz): The Lord Chancellor takes every measure to protect the independence of the judiciary, including by ensuring that our judicial appointments system is based solely on merit. For example, as I shall be announcing later to the House, he has asked Sir Leonard Peach, until recently the Commissioner for Public Appointments, to provide a report to him on the operation of the appointments procedures in relation to Queen's counsel and judicial appointments.
As I said earlier, my noble and learned Friend the Lord Chancellor recently restated the role of his office in a speech to the third worldwide judiciary conference at Edinburgh on 5 July.

Sir Sydney Chapman: I am grateful for that assurance. As planning inspectors are involved in a judicial capacity—albeit on matters relating to town and country planning—does the Minister share my outrage that a recent advertisement asking people to apply to become planning inspectors included the phrase, "Freemasons need not apply"? The Minister may say that this is a matter for the Deputy Prime Minister. However, as it is

such an outrageous unfairness, may I ask him to ask the Lord Chancellor to consult the Deputy Prime Minister on the incident?

Mr. Vaz: I have not seen the advertisement so it is extremely difficult to comment on it. As the hon. Gentleman correctly realises, this is a matter for the planning inspectorate and for my right hon. Friend the Deputy Prime Minister. However, if the hon. Gentleman sends me the advertisement, I will have a look at it.

Dr. Norman A. Godman: Is not the independence of the judiciary from political sniping particularly important when a judge is conducting an independent tribunal? My question is prompted by the sniping by some at Lord Saville, who is conducting the Bloody Sunday inquiry.

Mr. Vaz: My hon. Friend is absolutely right. Of course the judiciary is above party politics. As I have said on numerous occasions in this House, our judiciary is the best in the world. We have people of the highest quality who are full of integrity. It is quite wrong for people to attack judges in that way, knowing that they do not have the means to reply.

Mr. David Heath: Is not it right that independence is best guaranteed by the appointments procedure? Would not it be better if in the appointment of judges there were more transparency; if in the appointment of magistrates we adhered to the system of equity that is in place; and if appointments to the shrievalty were not done at all, as they are a waste of time?

Mr. Vaz: Our system is a good one, and I can see no flaws in it. It produces people of merit on the High Court Bench and in the magistracies. I am happy, as is the Lord Chancellor, for the procedures to continue in this way.

Welsh Language (Courts)

Mr. Gareth Thomas: If he will make a statement on the use of the Welsh language in the courts of England and Wales. [91633]

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Keith Vaz): We are making every effort to ensure that a bilingual service is available in Wales, including providing for court hearings to be conducted in Welsh.

Mr. Thomas: I am grateful for that answer. Does my hon. Friend appreciate that there is concern in Wales that his Department has been slow in producing Welsh language schemes as required under the Welsh Language Act 1993? Will the Department recognise the equal validity of the Welsh and English languages in the courts of Wales and, for that matter, England, through practice directions by the courts themselves and in face-to-face contact with the public through the court service?

Mr. Vaz: I hope that my Department is not slow. I have no evidence to suggest that it is not working swiftly on the matter. A draft copy of the scheme is with the Welsh Language Board. We intend to consult on it widely. We are pleased to note that there are several


bilingual judges and that there is a practice direction about the use of the Welsh language. If my hon. Friend has any evidence to suggest that we are not acting as swiftly as we should, will he please let me know? We regard the

matter as serious and believe that the practice direction has rightly highlighted the concerns. We want to ensure that the Welsh language is used in court proceedings when people want it to be used.

National Air Traffic Services

Mr. Bernard Jenkin: (by private notice): To ask the Secretary of State for the Environment, Transport and the Regions if he will make a statement on the proposed sale of shares in National Air Traffic Services.

The Minister for Transport (Mrs. Helen Liddell): In response to a written question from my hon. Friend the Member for Great Yarmouth (Mr. Wright), the Government have announced today their intention to proceed with a public-private partnership for National Air Traffic Services. A copy of the answer and the response to the consultation document are in the Vote Office and the Library.
This is a new and innovative enterprise, providing a genuine partnership between the public and private sectors and creating a new partnership company that will deliver a safe, modern and efficient air traffic control system for the future. For some time, considerable—[Interruption.]

Madam Speaker: Order. I want no running commentary from the Opposition Front Bench while the Minister is making a statement at my request.

Mrs. Liddell: Thank you, Madam Speaker.
For some time, considerable concern has been expressed by many official bodies and individuals about the problems arising from the growth in air traffic. Those concerns have centred on safety, on long-term investment and on management control. In response, the Government have produced radical plans for dealing with air traffic control. We have consulted widely and we are now in a position to announce our proposals.
The public-private partnership for NATS will create a proper separation between the operation of air traffic control and its safety regulation, so as to enhance safety. The operational strength and the safety record of NATS are among the best in the world, but it needs a wider range of management skills and access to capital to meet the challenges of the future, and in particular to cope with the ever increasing rise in traffic.
We want to build on the strengths of NATS, bringing in new management skills, in particular project management expertise; to improve aviation safety; to secure long-term investment of £1 billion over 10 years; and to retain public accountability in a strategic industry. Safety is paramount and always will be.
Last week's report from the Environment, Transport and Regional Affairs (Transport Sub-Committee) summed up the matter. The United Kingdom has an excellent safety record and we have to work very hard to maintain it. We must always guard against complacency, but we should also avoid scaremongering. The Civil Aviation Authority's safety regulation group will continue to regulate aviation safety to the highest standards. There will be no profits before safety in the NATS public-private partnership or anywhere else in United Kingdom aviation.
The aviation community, the Select Committee, the former Monopolies and Mergers Commission, the trade unions and others have been calling for years for safety

regulation to be separated from service provision. This public-private partnership will create a proper separation between the operation of air traffic control services in the new partnership company and their safety regulation in the separate independent Civil Aviation Authority. It will provide NATS with more flexibility in investment and management decisions, give NATS the commercial opportunities that it lacks in the public sector, provide the right structure to maximise efficiency, and introduce the commercial, financial and project management expertise that NATS needs.
Our new partnership company can do all those things relatively quickly, and only it can provide all those benefits. It will be a real partnership. The Government are retaining a 49 per cent. stake in NATS, while NATS staff will have a 5 per cent. share. There will be an equal element of gifted shares to all employees, with an opportunity to buy more. A private-sector strategic partner will take the remaining 46 per cent. of the company.
The strategic partner will give NATS access to private capital, enable that capital to be utilised to best effect, and supplement NATS' operational strengths with investment and project management skills, and with commercial experience. That will enable the company better to meet the key investment needs that we face in the United Kingdom. Around £1 billion will have to be invested over the next decade. In time, that will provide the ability to grow the company internationally, extending NATS operational excellence worldwide.
The Government's involvement with the new partnership company will continue. We will appoint some of the company's non-executive directors, and there will be a specific requirement for board unanimity on the specific matters necessary for protecting the taxpayer's financial interests, such as the policy for dividends or reinvestment.
The Government will hold a golden share and will have statutory powers to direct NATS to act in a certain way in the event of crisis, war or national emergency, or to enable the Government to protect national security and the United Kingdom's bilateral and international obligations. The joint and integrated civil and military use of air traffic control systems can and will continue under the public-private partnership.
However, the Government and the strategic partner are not the only interested parties. A key innovative feature of the new partnership company will be a new stakeholder council. That will bring together Government representatives, the strategic partner, NATS management, customers and staff representatives in a forum for full and open consultation about the company's plans and strategies for tackling the challenges that we all face.
Operationally, NATS is one of the best air traffic services in the world. We will build on that, and the public-private partnership will guarantee the future of both Prestwick and Swanwick as part of a two-centre strategy. We want to maintain and enhance NATS' operational excellence. We want to build on its strengths by adding new access to private capital so as to ensure more robust investment. We want to access better management to ensure the completion of both the Swanwick and Prestwick air traffic control centres. We want to give the company an edge in the changing international world of air traffic management.
This is a whole new approach to the management of our air traffic control. It embodies a new safety framework, a new public-private partnership, a new form of management structure, a new form of public accountability and regulation, a new commercial freedom giving access to long-term investment, a new stakeholder council representing all the industry, and a new range of employee rights and security.
The Government are committed to establishing United Kingdom air traffic control as a world leader, securing enhanced safety not just in the skies above Britain, but throughout the world.

Mr. Jenkin: Let us be clear that the Minister for Transport did not volunteer her statement. Why must the Government be dragged kicking and screaming to the Dispatch Box to explain the detail of one of their most controversial policies? Why did the right hon. Lady deliberately withhold until this morning the answer to the written parliamentary question due yesterday? Why was it given only after she had briefed the press and after she had been given a free ride on the "Today" programme? What respect does that show for Parliament? When will the Government show some respect for their own Back-Bench Members and the rest of the House?
I have looked forward to today's statement, and I am grateful to you, Madam Speaker, for its occurrence. We would naturally welcome a straightforward privatisation of national air traffic control that gave clear ownership to the private sector and that was properly regulated for safety by the Civil Aviation Authority. We shall examine the small print of the new privatisation very carefully. It has all the hallmarks of another convoluted compromise, like the public-private partnership on the tube, when the Deputy Prime Minister was forced to accept a Treasury-driven deal in which he did not believe.
I have four key questions: what is the nature of the privatisation; who will be in control; what are the implications of possible foreign ownership; and what have been the costs of more than two years of Labour dither and delay?
First, what is the difference between this public-private partnership and privatisation? Does the Minister agree that if something walks like a duck and quacks like a duck, it is a duck? If the Government are transferring 51 per cent. of shares and day-to-day control to the private sector, why is that not privatisation? The trades unions think it is privatisation—so do we; so does the City; and even most of the right hon. Lady's party thinks that this is privatisation.
Is the Minister haunted by Labour's anti-privatisation scare stories from before the election? The Prime Minister then attacked the Conservatives, saying that
the Government cast around for any hapless part of the public sector to privatise. Air traffic control is floated as a possibility".—[Official Report, 16 November 1994; Vol. 250, c. 15.]
That notion was described as crazy by the then Labour transport spokesman, the right hon. Member for Oxford, East (Mr. Smith), who went on to declaim to an ecstatic Labour conference:
Labour will do everything to block this sell-off. Our air is not for sale.

Where is he today? Why has the Minister for Transport not had the courage to tell her own Back-Bench Members that this proposal is a privatisation?
Secondly, who will be in control? If the Government own 49 per cent., employees 5 per cent. and the private sector 46 per cent., who will actually control the business? Will the right hon. Lady confirm that she intends, as stated in the conclusions to her consultation which were published today, to allow the private sector clear operational control?
Thirdly, why have the Government spun the names of potential bidders in the media, but not—even now—come clean with the House? Will the Minister confirm that the Government are contemplating the sale of the controlling stake in Britain's air traffic control system to a foreign bidder? Will she confirm that the name in the frame is Thompson CSF of France? Has she discussed with the Secretary of State for Defence the crucial questions that that may raise about foreign intervention in matters of United Kingdom national security?
What is the relevant expertise and experience of a French-owned company—40 per cent. of which is, incidentally, French Government-owned? What can that company bring to the deal when France has one of the worst, most heavily unionised and chaotic air traffic control systems in Europe? Is it the third way to privatise over here so that a foreign Government can have a stake over there? Or is this another example of what Scots call the auld alliance?
Finally, why have the Government been dithering for more than two years? Does the Minister not realise that while the Government were searching for a way to spin this privatisation in the media and her Department was missing its slots in the legislative timetable, Britain's air traffic system has been starved of capital investment and has had its investment plans shelved, as is pointed out in today's devastating report from the Select Committee chaired by the hon. Member for Crewe and Nantwich (Mrs. Dunwoody)? That means that congestion and delays are being stored up for the future so that business men and holidaymakers will be kept waiting in airport lounges or sitting around on aircraft runways waiting longer for take-off because of Labour's years of indecision. Is this not another example of Labour's contribution to a standstill Britain?

Mrs. Liddell: The hon. Gentleman talked about me getting a free ride, but the only free ride I get is when he is at the Dispatch Box. He cannot make up his mind. First, he says that this is privatisation, then he asks who has control. One reason why we did not go down the route taken by the previous Government is the mess of privatisation that they introduced. We saw the mess that they made of Railtrack, which was recently exposed by the National Audit Office. The previous Government left us with a mess that had to be sorted out.
The hon. Gentleman asked why it has taken two years to get this far. It is because we first had to untangle the mess that we inherited and ensure that the Swanwick centre was put back on stream. My right hon. Friend the Member for Hamilton, North and Bellshill (Dr. Reid) had to sort out the mess over the centre at Prestwick because of the botched private finance initiative attempts of the previous Government. The decisions that we have announced today will underpin and safeguard Swanwick and Prestwick.
In his confused response to the statement, the hon. Gentleman raised several scare stories about the future of the national air traffic system. It is precisely because we will not put profit before safety that we have not gone for full-scale privatisation. The Government will retain strategic responsibility for NATS through the golden share. That will be entrenched in any legislation in a way that ensures that our stake cannot be changed in order to go to full-scale privatisation. We are determined to ensure that the safety of air travellers is protected.
The hon. Gentleman asked about foreign control. He seems more prepared to believe what he hears on the radio and reads in newspapers than to read the documentation before him. The Government have not approached any bidders—but yes, several people are interested in our proposals because they see their attractions. There will be not a flotation of NATS, but a trade sale to a strategic partner chosen through a rigorous competitive process that will take into account any questions of national security or of not being suited to the security and safety aspects. There will be stringent suitability tests and we will be able to filter out unsuitable investors of whatever nationality. The Government will maintain the right to veto the transfer of substantial shareholdings.
In addition, by ensuring that the employees of NATS have access to a shareholding, we are recognising their expertise and concern about the future of the service to which they contribute. In doing that, we are also ensuring that their pensions are protected and that they can look forward to the expansion of NATS rather than the haphazard, ill-thought-out proposals of the previous Government, announced by the right hon. Member for North-West Hampshire (Sir G. Young) and reaffirmed in the Conservative party manifesto.
The hon. Gentleman also made a point about why the announcement is being made today. We wanted to make the announcement earlier, but we required a response from EUROCONTROL on the European charging system. That became available last week and a parliamentary question was tabled on Friday. That question was quite clear on the Order Paper, and we answered it this morning. We also ensured that no information about the proposal was made public prior to the answering of that question, tabled by my hon. Friend the Member for Great Yarmouth. If the hon. Member for North Essex (Mr. Jenkin) had been awake at 7.10 am—he is plainly not awake at the moment—he would have heard me say to Mr. Naughtie that I could not provide details about the announcement that we would be making later today.
We have secured the future of National Air Traffic Services in a way that protects the safety of the travelling public and allows the expertise of NATS to be available internationally, which it could not be previously. We have witnessed the previous Government's mistakes and we have learned from them. We have been prepared to listen and we have acted.

Mrs. Gwyneth Dunwoody: My right hon. Friend will be aware that it is precisely because safety and the control of our airspace has political and, above all, defence implications that many of us believe that this is a wholly unsuitable organisation to be offered up to the profit motive. If the arrangement goes ahead, what will happen to the independence of airspace planning? As Swanwick is not working and will not,

apparently, work for some time, will the taxpayer be left with a heavy contingent responsibility? That would not be acceptable.
Will it be possible to maintain the independence of vested interests for airspace planning, which is tremendously important? Finally, why was the Government's response to my Committee sent to us in the form of a memorandum that cannot be placed in the public domain until it has gone through the Main Committee when, frankly, a Command Paper would have been suitable?

Mrs. Liddell: On my hon. Friend's last point, the Government chose a memorandum as a way of responding quickly and fully to the Select Committee. I make it absolutely clear to the Committee and the House that the Government have no objection to that memorandum being published, should the hon. Lady choose to do so. We chose that method as a means of speedily sending a response to the Committee because we were anxious that these very important issues should be placed fully in the public domain as quickly as possible. No disrespect to the Committee was intended, and we are more than happy for those details to be published.
My hon. Friend asked about the independence of airspace planning. That is preserved. She asked also about the danger of the taxpayer having to make contingency payments for Swanwick. One of the attractive reasons for adopting these proposals is our desire to ensure that the taxpayer will in future be relieved of the costs created by the absolute mess that the previous Government made of the contract for Swanwick. That is not dissimilar to the mess that they made of the channel tunnel rail link, when my right hon. Friend the Deputy Prime Minister had to intervene to ensure that there was a proper contract to protect the interests of the British taxpayer.

Mr. Tom Brake: Before the election, Labour said:
Our air is not for sale.
It is very obvious now that at least half of it is up for grabs.
I have a few simple questions that I hope the Minister will be able to answer. What guarantees can she give that a future Government will not sell the Government's share? What estimates have the Government made of the impact of their proposals on the implementation date for Swanwick? What re-evaluation of the public-private partnership proposals have the Government undertaken, as recommended by the Transport Sub-Committee to—as it said in its report:
ensure that they are entirely compatible with the safe and expeditious movement of air traffic"?
What ceiling have the Government placed on any bonuses or options that senior NATS management might derive from this sale, so as to reduce the chances of creating any NATS fat cats? Finally, will the Minister comment on the relevant expertise in air traffic services of National Grid, which I understand may be the frontrunner for providing the service, or of any other possible bidders?

Mrs. Liddell: The hon. Gentleman asked several questions. He asked whether any guarantees could be given that no future Government would seek to privatise


air traffic control. As he knows, no Government can bind their successor, but written into the Bill will be a provision to ensure that, should a future Government decide to take that route, further primary legislation would be needed. That is as much of a guarantee as any Government can give about their successor.
Swanwick is now on stream to come into full operation in about 2001–02. The technical handover has taken place and training and testing of the systems is under way. Those arrangements will lead to much better project management, which will help the second centre at Prestwick. A project manager has already been appointed for Prestwick and we are expecting a full analysis of the business case in the next couple of months. Therefore, this proposal will speed up the process of getting a proper two-centre policy under way as quickly as possible.
The hon. Gentleman asked about safety guarantees. As I pointed out in the statement, we intend to secure a separation of the safety responsibilities of the Civil Aviation Authority from the operational responsibilities of the new partnership company. That has been in demand for some time. The Government see the logic of that, which is why we have proceeded in this way.
The hon. Gentleman referred to fat cats. That is an extremely valid point, because the previous Government's privatisations showed that they were prepared to create fat cats at the taxpayer's expense. We shall protect the taxpayer through the Government's shareholding and through the Government's appointment to the new partnership company of directors whose concerns will include the remuneration of personnel of that company.
The hon. Gentleman mentioned the previous Government's privatisation proposals, which, when in opposition, we opposed. We did so because, under the previous Government's proposals, our air would have been for sale. By separating the safety requirements of the CAA from the operational responsibilities of the new partnership company; by ensuring the existence of the golden share and the establishment of the shareholder company; by requiring that the Government appoint non-executive directors to the board of the new partnership company; and by our involvement with EUROCONTROL and the announcement that it made last week on the European charging system, we are in a position to put in place safeguards that would not have been put in place by the previous Government. That is why we have gone for a unique approach in a new partnership company. We have learned the lessons of the mess made of privatisation by the previous Government.

Dr. Gavin Strang: Does my right hon. Friend agree that the most important requirement facing air traffic control is to ensure that the new centres at Swanwick and Prestwick are successfully brought into operation without further delays? Would it not be better to allow the top management of air traffic control to concentrate on those major technical and managerial issues without being diverted by a major and complex privatisation? As air traffic control in this country runs at an operating profit, if it is the Government's main objective to allow air traffic control to raise money privately for investment, why do they not

allow a public sector National Air Traffic Services to borrow in the market in the same way as is envisaged for the Post Office?

Mrs. Liddell: My right hon. Friend has raised a number of issues. He asked about the development of Swanwick and Prestwick—an issue in which he takes a special interest. Through the public-private partnership, we shall be able to ensure that there are no further delays in getting Swanwick and Prestwick on stream. As a result of the previous Government's incompetence, the delays at both Swanwick and Prestwick have been unacceptable. Faced with an increase in traffic of 6 per cent. per annum—8 per cent. last year—we need those two new centres on stream very quickly indeed.
My right hon. Friend asked about the pressures on top management. One reason why we have gone for a public-private partnership is that we want to be able to enhance and enlarge the management expertise within NATS. One considerable difficulty that we experienced when we came into government was the lack of project management at Swanwick. As a consequence of the lessons learned from that, an external project manager was appointed to allow the Prestwick development to go ahead. Rather than hampering top management, introducing a public-private partnership will assist top management to deal with the complex issues that will require £1 billion of investment over a 10-year period—an extremely complex matter.
The right hon. Gentleman—[HON. MEMBERS: "Friend."] Indeed, he is a right hon. Friend. When I was struggling for a way to emphasise how good the Government's proposal was, I looked to the words of my right hon. Friend, who stated on 11 June 1998:
This package, taken together, will guarantee the highest safety standards as air transport increases in the future. It will retain a large public stake and golden share in NATS. And it will ensure that NATS can finance its future investment effectively within a secure framework of safety and economic regulation."—[Official Report, 11 June 1998; Vol. 313, c. 637.]
I could not have expressed it better myself.
However, our proposal is not solely a revenue-raising exercise, although the previous Government put a price of £500 million on NATS. Our proposal will allow an opportunity to raise capital much more freely on the international markets, and it will allow it to be done without Treasury constraints. It will allow a degree of flexibility that could not be guaranteed within the public sector. It will also ensure that prudent use of the public finances will enable us to continue with the economic growth that has been secured by the Government through a sensible economic policy, which the Opposition seem now to have adopted.

Mr. John Wilkinson: May I tell the right hon. Lady that my constituents, a number of whom work at the West Drayton centre, will be profoundly unimpressed by her attempts to shuffle the announcement through in a written answer the day before the summer recess? On my constituents' behalf, I express my warm thanks to my hon. Friend the Member for North Essex (Mr. Jenkin) for ensuring that the matter is being properly and publicly debated.
The right hon. Lady has no comprehension of air transport safety matters. Is it not the case that countless airlines across the world are owned wholly by the private


sector, are regulated by the appropriate regulatory authorities and perform entirely competently and safely to standards equivalent to those in the public sector? Is it not also a fact that air traffic delays are now running at 10 per cent. of civil air transport movements in United Kingdom airspace? In view of that and the inordinate delays both with the Prestwick centre, which is still in project definition, and with Swanwick, why has not the right hon. Lady come to the House much sooner to put that shambles to rights? Will she bear in mind that there are a number of private sector airports with private sector air traffic controllers that do a perfectly good job with regard to air safety?

Mrs. Liddell: That is the longest intervention that the hon. Gentleman has made without mentioning Europe. He will know, if he has contact with air traffic controllers at West Drayton, that there has long been uncertainty about the future of NATS, largely because of the mess that we inherited from the Government whom he supported. I judge it a matter of some importance to end that uncertainty, so that those who work in NATS can be taken fully into account as our proposal moves forward. Had we received a response from EUROCONTROL earlier than last week, we would have been able to publish the proposals earlier than last week.
The hon. Gentleman spoke about privatised airlines. NATS is not an airline. We seek to take the best of the public sector and the best of the private sector and work together in partnership, with safeguards and controls that guarantee the national interest, security and safety.
The hon. Gentleman mentioned air traffic delays. As he will know if he has visited West Drayton, over the past year NATS has gone to considerable lengths to try to limit the number of air traffic delays over United Kingdom airspace, and has made some improvement. However, the hon. Gentleman makes a valid point about the international impact of air traffic delays.
One of the great benefits of the proposal before the House this afternoon is that it will enable the considerable expertise of NATS to be marketed internationally, so that we can take our experience to other countries which seek to learn from Britain's experience and, in that way, seek to improve air traffic not just nationally but internationally in a way that benefits all passengers.

Several hon. Members: rose—

Madam Speaker: Order. As a number of hon. Members seek to ask a question on the statement, may we have brisk questions and answers so that I can call as many hon. Members as possible?

Ms Sandra Osborne: My right hon. Friend said that the speculation over the years about NATS has caused constant insecurity, and I agree—but does she agree that we are now faced with another two years of turmoil while the PPP is introduced? When will phase 2 of the new Scottish centre begin, and how will that be funded? Is my right hon. Friend aware of the early-day motion in my name, signed by 140 hon. Members, calling on the Government to consider in detail a public sector alternative with greater commercial freedom? What action have the Government taken on that? Can she confirm whether the receipts will be used for investment in NATS

or for other transport matters? Finally, does she agree that, when hon. Members jet off for their summer holidays, they should ponder seriously the future safety of national air traffic control?

Mrs. Liddell: I have discussed these matters with my hon. Friend, who takes a considerable interest in matters at Prestwick. She mentions the uncertainty that has existed over Prestwick, but she will be well aware of the considerable difficulties in moving ahead with the Prestwick project because of the private finance initiative proposals that we inherited from the previous Government. Now that we have resolved those difficulties with today's announcement, we should be able to press ahead with the Prestwick proposal. It will also allow the management strengthening that is required to process that as quickly as possible.
My hon. Friend also referred to the independent publicly owned company proposal from the trade unions. We considered that in some detail—it contains some excellent ideas—but it would still have meant that NATS would not have had the commercial flexibility to raise internationally the capital required to secure its future in the long term.
With regard to the receipts from the public-private partnership, my right hon. Friend the Prime Minister has already pointed out that the arrangements mean that the Department of the Environment, Transport and the Regions has been able to secure an even better settlement in the comprehensive spending review so that we can ensure an integrated transport system that operates in the United Kingdom's interests. Phase 2 of the new centre at Prestwick will be funded under the partnership, and the Government will fund it until then.

Mr. Christopher Chope: Many of my constituents who work for NATS will be confused and bewildered by this muddled statement. Can the Minister come clean with the House about what will happen to the £500 million that will be raised from the sale? Is not the reality that that money is needed to pay for the massive overspend on the Jubilee line, and that that is what is driving this weird Government announcement?

Mrs. Liddell: The massive overspend on the Jubilee line is much more than £1 billion, because of the ineffective contracts that we inherited which could have been designed only by someone who had no experience of drawing up contracts. The hon. Gentleman was a Transport Minister, so he should be hanging his head in shame. Were it not for the overspend on the Jubilee line, we would have been able to release even more expenditure for public transport in London and elsewhere, so we will take no lessons from the previous Government on how to draw up contracts.

Mr. Tony Senn: Is the Minister aware that her statement owes much more to Mrs. Thatcher than to Labour's manifesto, and that the way in which it was put confirms our fears that the Government distrust the public sector and want to see it mixed up with the third way? Is she also aware that today, Great Western Trains was fined £1.5 million for the accident at Southall two years ago, and that nothing that she says will remove people's doubts about safety when profit runs a service as important as this?
Is the Minister also aware that it is no comfort to know that the proposal was dictated by the Maastricht criteria, which require restrictions in public expenditure? The money will go towards paying for the Balkan war or keeping income tax down for the richest people, which is the one pledge that has been kept.

Mrs. Liddell: Mrs. Thatcher would never have taken into account the requirements of the employees of NATS. She would never have enshrined the golden share; ensured that there were Government-appointed directors and a requirement for unanimity among the board; put a stakeholders council and a stakeholders agreement in place; or retained statutory powers of direction for key Government interests. Similarly, she would never have ensured that safeguards were put in place to ensure that the taxpayer, as well as the travelling public, is protected. We have learned from the mistakes of Mrs. Thatcher and her supporters, which is why we are putting in place a public-private partnership that will add to the air traffic service, not detract from it.

Mr. David Wilshire: As one of Heathrow's Members of Parliament, may I congratulate the right hon. Lady on her party's U-turn? May I also congratulate her on adopting sound Conservative and capitalist approaches to providing public services? Will she keep in mind the fact that my constituents who live near Heathrow are far more concerned about aircraft safety than about who owns air traffic control? Will she assure the House that, as a born-again capitalist, she will ignore the socialist dinosaurs on the Benches behind her?

Mrs. Liddell: I do not respond to soundbites. The hon. Gentleman's constituents who live near Heathrow will be able to testify to the safety approach taken by NATS. We seek to build on that and scaremongering from either side of the House will not be appreciated.

Mr. John McDonnell: Hon. Members will be aware that Heathrow is in my constituency. My constituents have more aircraft above their heads than anyone else in this country—and if the proposal is seen to contribute in any way to a reduction in safety, they and the people of this country will never forgive this Government. What has happened to change Government policy in the two years and eight months since a Labour spokesman said, "We will not sell the air traffic control service."? We demand an explanation. In my view, the proposal, which will raise £500 million, is Treasury driven, but we should not be selling the safety of our skies.

Mrs. Liddell: If this Government thought that the proposal would do other than enhance the safety of the travelling public and those who live around airports, we would not have proceeded with it. We see a need for enhanced and strengthened management and more finance in NATS, which will ensure that it has the investment to allow it to deal with the growth in traffic that is taking place. That is precisely why we have proceeded with this private-public partnership. We inherited a situation in which the previous Government had been determined to proceed with a wholesale privatisation that would not

have taken safety into account. We have learned the lessons of Railtrack, which they sold for a knock-down price with no concern for safety. We are determined to enshrine partnership in the proposal, taking the best of the public and private sectors so that we can enhance not only safety, but future opportunities for air traffic controllers.

Mr. Eric Forth: I congratulate the Minister on taking this significant first step towards an exciting new future for the air traffic control system. I hope that the Government will continue to move towards an objective that we would support. Will she explain her rationale for the trade sale? Is it a result of her unique experience in the private sector and the lessons that she learned there? As a result of the thrust of her policy, will she consider naming this new service the Ronald Reagan memorial air traffic control service?

Mrs. Liddell: One of the lessons that this Government have learned is never to look to the previous Government when it comes to contracts. The contracts that we inherited—on the Jubilee line, the channel tunnel rail link, Swanwick and Prestwick—were bizarre. The right hon. Gentleman does himself no service in trying to undermine what this Government seek to do in relation to air traffic control. Private sector advisers warned previous Governments about the folly of their privatisation proposals, and his Government were not prepared to listen to them.

Laura Moffatt: Does my right hon. Friend accept that, given the rise in traffic around Gatwick airport from 27 million to 40 million, there is understandable nervousness about today's decision? Does she agree that, as the air industry is one of our premier industries, it is important to maintain public confidence? Are the air traffic control systems of any other country under private sector control?

Mrs. Liddell: Countries such as Canada and Switzerland have equity involvement in their air traffic services. We have looked closely at international examples. My hon. Friend says that people are anxious about air safety. I do not underestimate that, particularly given that people saw the mess that the previous Government made of privatisation. That is precisely why we have put, and will continue to put, safety at the centre of our proposals, and why we have put in place strong Government safeguards to ensure that the national interest is given priority.

Mrs. Jacqui Lait: Is the right hon. Lady content that the present air traffic control systems are safe from computer attack? What safeguards does she expect to put in the Bill to ensure that the new owners will retain the integrity of the computer systems?

Mrs. Liddell: The air traffic control systems currently in operation are well tested and tried. The new systems that are being put in place at Swanwick are being subjected to a rigorous process of testing. Technical handover has already taken place, and testing and training are being carried out. The Government will retain a veto over any measures planned by a prospective stakeholder partner in this enterprise which we feel might jeopardise the integrity of the systems. We believe that the safety of


the travelling public is paramount, which is why we pay tribute to those who work in NATS and to the systems that they operate with enormous safety. That should be recognised on both sides of the House.

Mr. Martin Salter: May I put on record my thanks to the Minister for meeting Members of Parliament who represent constituencies under the major flight paths, or who have serious reservations about the proposed public-private partnership?
I have three specific questions for my right hon. Friend. First, given the failure of the Rail Regulator to improve safety standards on our railways following the disastrous decision by the previous Government to privatise our railways, what confidence does she have that the new regulatory framework will be any better? Secondly, why are the air traffic controllers implacably opposed to the public-private partnership? Who knows best about aircraft safety: the people who have given us the safest and most reliable system in the world, or some politicians and a bunch of City investors? Thirdly, what should I tell my constituents who are concerned about overcrowding in the skies above the Thames valley and who were greatly encouraged by the statements by my right hon. Friend the Member for Oxford, East (Mr. Smith) just seven months before the general election?

Mrs. Liddell: I thank my hon. Friend for taking the opportunity to bring a delegation of Members of Parliament, from constituencies that surround airports, to meet me last week. A number of important points were raised at that meeting. Since last October, there has been a lengthy consultation process on these proposals and we have listened closely to the responses, which have been published and are available in the Vote Office and the Library.
My hon. Friend referred to the Rail Regulator's previous record. I remind him that we introduced the Railways Bill precisely so that we could strengthen the Rail Regulator's powers. The Civil Aviation Authority will now have sole responsibility for the safety aspects of air traffic control operations. That is what all the industry experts, including the Transport Sub-Committee, have asked for.
My hon. Friend mentioned the concerns of air traffic controllers about the Government's proposals, but they became aware of them only this morning. Our proposals take into account a number of points that they made in their own proposals. He should bear in mind the fact that they, too, advocated an equity-based solution. We are determined to ensure that the partnership that we are putting in place includes the best from the public sector and the best from the private sector.
My hon. Friend also talked about overcrowding in our skies. That is precisely why we need a public-private partnership that can proceed. quickly and get on stream the two new centres at Swanwick and Prestwick, so that as air traffic increases the structures and facilities available for managing our skies is up-to-date and forward looking.

Madam Speaker: Order. We must now move to the statement.

Hon. Members: More, more!

Madam Speaker: Order. I call Mr. Secretary Straw.

Political Parties (Funding)

The Secretary of State for the Home Department (Mr. Jack Straw): With permission, Madam Speaker, I wish to make a statement about the funding of political parties.
We came to office committed to reform. Our three commitments were, first, to require large donations to political parties to be disclosed; secondly, to outlaw foreign funding of political parties; and thirdly, to invite the Committee on Standards in Public Life to look into the wider question of the funding of political parties in the United Kingdom.
The committee, under the chairmanship of Lord Neill of Bladen, was given that remit in November 1997 and reported in October 1998. The committee's review was comprehensive and authoritative. Because of the range of matters covered, it was not practicable to legislate in the current Session of Parliament, but I promised to publish a draft Bill before the summer recess, and I am doing that today.
The draft Bill is contained in a White Paper which provides the Government's overall response to the Neill committee's report. We intend to introduce the necessary legislation as soon as possible, taking full account of comments received from right hon. and hon. Members and from outside organisations by 15 October.
I shall summarise the main points of the White Paper and draft Bill. The Bill takes forward the two specific manifesto commitments to which I referred earlier, and which were endorsed by the Neill committee. Donations to political parties of £5,000 or more at the national level and of £1,000 or more at the local level will have to be made public. Furthermore, it will be unlawful for a political party to receive donations from an individual who is not registered to vote in the United Kingdom, or from companies that are not incorporated in the European Union and also carrying on business in the United Kingdom. Provision is also made for shareholder approval for donations.
There has also long been concern over the amounts that political parties are able, without restriction, to spend nationally at election times. The existing law, developed in the last century, already regulates very closely what can be spent by or on behalf of candidates at elections at constituency or local ward level. However, in the present day a large part of the effort and money devoted to winning elections is spent by parties not at a local or constituency level, but nationally and not on behalf of specific candidates.
The Bill therefore provides for new national spending limits on election expenditure, and agrees with the Neill committee that the limits should be set at a level substantially below the amounts spent by the two main parties in 1997, to avoid what Neill described as an arms race in spending between the parties.
On that basis, Neill recommended and the Bill provides a limit of £20 million for the main parties involved in a United Kingdom general election, with lower limits for parties that do not field full slates of candidates, and for other elections. When the Bill is introduced it will also contain provisions for regulating third-party spending at the national level, as recommended by the Neill committee.
To enforce the restrictions on donations and expenditure, the draft Bill places obligations on the parties at both local and national level to keep and submit accounts. That will apply particularly to the recording of donations. The scheme in the draft Bill, which sets a de minimis level of £50 for internal reporting, follows the Neill committee's recommendations.
All political parties will wish to study these detailed provisions carefully over the forthcoming months, but if the object in view can be served with some simplification or easement, the Government will be open to suggestions.
Annexe 1 of the White Paper contains a detailed chart setting out each of the Neill committee's recommendations, and the Government's proposed response. The one recommendation that we have not pursued is the recommendation that income tax relief should be allowed on donations to political parties. The Government take the view that that would amount to state aid by another route, and would divert expenditure from other priorities.
Some political donations are made not to a party as such, but to groups within a party or to individuals, including Members of Parliament. We agree with the Neill committee that comparable requirements should be imposed in respect of such donations, and the Bill, as introduced, will cover that. We would welcome views on whether the obligation to report such donations should fall on the party in question or on the person who receives them, and on whether donations that are currently recorded in the Register of Members' Interests should be put on a statutory basis.
The Neill committee made a number of suggestions for change relating to referendums. The Government accept them all, as I made clear when the Neill report was published last October. It is important to ensure that the two sides in any referendum campaign have a fair opportunity to put their case. We therefore propose to include state cash support on an equal basis for the two umbrella campaign organisations, with free mailing and access to referendum broadcasts, as the Neill committee suggested.
The committee also made recommendations about the position of the Government of the day in any referendum campaign. As it suggested, a Government are almost bound to be closely engaged in the subject matter of a referendum; but there is a point at which the Government should step back, and leave it to political parties and other campaign groups to make their case to the electorate. The draft Bill therefore provides for a 28-day period running up to the referendum poll in which the Government of the day should not issue material to the public on the subject matter of the referendum. Other rules, similar to those providing for election purdah periods, will also apply.
In one respect, however, the Government have gone further than the Neill committee's recommendations. In our judgment, it would be unfair and inconsistent with everything else that is proposed if referendum campaigns could be skewed by the injection of disproportionately large funds that happen to be at the disposal of a particular party or campaign group. We therefore propose to set limits on all organisations involved in referendum campaigns. In the draft Bill, the limits are £5 million for the two designated umbrella organisations and for

political parties with two or more Members in the House of Commons, and £500,000 for other political parties and campaign organisations. Those restrictions on spending would run from shortly after the date when a Bill providing for a referendum is introduced in Parliament. As Neill recommended, referendum organisations will also be subject to the same requirements as political parties in regard to foreign donations and other related matters.
I have left until last one of the most important provisions of the draft Bill. The Neill committee recommended, as have many others, the establishment of an electoral commission, and the Government agree with that recommendation. The commission's first function will be to oversee observance by political parties and others of the new regulatory regime; but I believe that we ought to go further. The commission will therefore be charged with making recommendations on changes to electoral law. We also envisage its having, in a wider sense, an important role to play in voter education. I want it to encourage people to vote in elections and referendums, and to help to explain the democratic system in a wholly non-partisan way. The draft Bill also provides for the electoral commission to take over, at a later date, the functions of the parliamentary boundary commissions and of the Local Government Commission for England.
It is paramount that the electoral commission should be wholly independent of the Government of the day. The draft Bill therefore provides the strongest safeguards of that kind which our constitution can lay down. The commissioners would be appointed by Her Majesty on an address from the House of Commons. A Speaker's committee would be established to oversee the commission's budget.
The Neill committee's report rightly emphasises the vital contribution, which we should celebrate, that political parties make to this country's democratic life, but for too long, public confidence in the political system has been undermined by the absence of clear, fair and open statutory controls on how political parties are funded. All of us here want to encourage citizens to play a full part in this country's political system, and that must include encouragement of voluntary donations to political parties.
The Neill committee report gives us all the chance to make significant improvements in this vital area of our national life. Today's publication of the draft Bill and White Paper provides the detail of the Government's intentions. By providing greater honesty and openness to our political system, we hope to restore public trust and to promote greater confidence in our democracy.

Miss Ann Widdecombe: I thank the right hon. Gentleman for his statement and for his customary courtesy in giving me early sight of the statement—a novelty that I am still getting used to.
I add my congratulations to the Neill committee on a thorough and detailed work that contains much that will improve our democratic way of life. Having started on that friendly note, may I ask the right hon. Gentleman to comment on some glaring omissions in the draft legislation?
Why, for example, despite yet more assurances and promises today, is there nothing in the draft legislation—which is, after all, all that right hon. and hon. Members and the public have to comment on in the consultation


period—on banning blind trusts, let alone any proposals for the detailed working of such a ban? Is that because five senior members of the Government used such funds: the Prime Minister, the Deputy Prime Minister, the Chancellor of the Exchequer, the Foreign Secretary and the Leader of the House?
Why does the proposed legislation do nothing to end the scandal of cash for policies, or to stop a repeat of the Bernie Ecclestone and Formula One affair? Will the legislation stop organisations such as, say, the International Fund for Animal Welfare, to which this small donor will make no further donations, and the Political Animal Lobby from buying policies at election time? Given that large donors to Labour have been given positions both in and by the Government, why is no effort made to ensure that all donations are not only without strings, but seen to be without strings?
How does the draft legislation propose to ensure that donations do not buy positions in government? [Interruption.] That was an important question, which the House perhaps did not hear. I asked the right hon. Gentleman how he intends to ensure, given that there is nothing in the draft legislation, that donations do not buy positions in government.
Why are trade unions given a privileged position in the legislation? Why does it require a disregard of the fact that they might be affiliated to a political party, a disregard that will not apply to any other organisation?
The right hon. Gentleman has said that he does not agree with the Neill proposal for tax relief on political donations of up to £500—but surely he will concede that the cost of such a measure would be barely more than the Government are spending on their own special advisers?
Will the right hon. Gentleman explain why, although the Government will be subject to restrictions for only 28 days before a referendum is held, other organisations will have such restrictions for up to six months?
Will the right hon. Gentleman tell the House why, according to his draft legislation, no candidate will be allowed to stand as, for example, an independent socialist or a pro-London candidate without first setting himself up as a political party?
How are national limits on spending to be enforced for a period of one year before a general election when we do not have fixed-term Parliaments?
Finally—it is a sensitive and delicate question, but nevertheless an important one—given the legislation's proposals on Northern Ireland, will the right hon. Gentleman tell us whether Sinn Fein will be able to receive foreign donations—for example, by channelling them through the Republic?

Mr. Straw: I am grateful for the right hon. Lady's comments at the beginning of her statement, and particularly for her thanks—I gave mine in my statement, but am very happy to repeat them—to the Neill committee for the excellence of its work and recommendations.
The right hon. Lady is obviously very sorry that I have shot her fox by accepting all of the Neill committee's recommendations. Consequently, she has been left thrashing around in a state of amnesia about the Conservative party's record on political funding. The simple truth—an apology from a Conservative spokesman would be in order on the matter—is that we would have

needed neither the Neill report nor the draft Bill had the Conservative party not sunk the funding of political parties—its party—to such depths.
Moreover, neither the report nor the draft Bill would have been necessary had not the previous Government—of whom the right hon. Lady was a member—repeatedly refused to refer the funding of political parties to the Nolan committee. Time and time again did my right hon. Friend the Prime Minister demand that the previous Government do so, but they point-blank refused.
The right hon. Lady mentioned the interesting issue of blind trusts. The body of the report—not only the Bill, but the whole of the White Paper is subject to consultation—makes it clear that, for the simple, straightforward and very prosaic reason that parliamentary counsel ran out of time in drafting—[Laughter.] The right hon. Lady may laugh at that, but she knows two things very well. First, this Government have a heavier legislative programme than previous Governments. Secondly, parliamentary counsel's time is limited. She asked me what we were doing about blind trusts. The answer to her question is given in full on pages 23 and 24 of the White Paper, which she has had for hours. If she had read it—if she had used that time sensibly—she would have seen that the Government have accepted every single one of the Neill committee's proposals on blind trusts.
The Government have always been clear on the issue of blind trusts. In our evidence to Neill, we said that blind trusts should be the subject of prohibition. What did the Conservative party—not the previous Government, but the current official Opposition, led by the current Leader of the Opposition—say about blind trusts? It said:
We believe that there is an argument in favour of a form of blind trust.
So the right hon. Lady comes to the House not knowing her own party's policy on the issue of blind trusts. The party preceded that reference to blind trusts with the following absolutely stunning statement in respect of political donations:
We believe that there is a perfectly honourable case to be made for anonymity".
The Tories' pursuit of that case for anonymity was one reason why the reputation of the political process was plunged so low during their time in government.
The right hon. Lady asked me about donations being made only without strings. There is no suggestion that donations should be made with strings, although I know that the Conservative party has great difficulty with that, given its record. Indeed, the whole purpose of a transparent system of reporting and disclosure and strengthening the regulation of the honours system is that we do not want to replicate the process that we witnessed in the 1980s and early 1990s, when there was a strange coincidence—I put it no higher than that—between those who gave large donations to the Conservative party and those who received honours or other favours.
The right hon. Lady asked me about special advisers. I do not think that she should complain about the money that the Opposition receive from the public purse. We sought to gain a reasonable increase in the money that the Opposition received from the public purse and we were systematically knocked back on that. We have been generous to a fault. The Opposition now receive £500,000 for the Leader of the Opposition's office alone; altogether


the Opposition receive £3.4 million—an increase of 250 per cent.—and it remains an open question as to whether the British taxpayer is getting value for money from the Opposition.
The right hon. Lady asked about the trade unions. Neill recommended no change in the regime for trade unions. They are already properly regulated and have been the subject of much tighter regulation than the shareholder disclosure regime that we plan to put in place. The national limits that we propose should apply for one year before an election takes place. I understand the right hon. Lady's point that people do not have precise notice of when an election will take place. I am happy to discuss that with all right hon. and hon. Members, but if the right hon. Lady thinks about the matter, she will appreciate that it is essential that the limits should apply for longer than the four or five weeks of an election campaign. In practice, most expenditure by a political party is not expended until after the election whistle is blown or, as in early 1997, when it is obvious when the election will take place. However, there is some election spending in the preceding period and it is important that the regulations should cover that.
The draft Bill contains special provisions relating to Northern Ireland to protect the identity of donors, if necessary. They apply to all parties, but of course, as we have made very clear, we are ready to accept comments on them.

Mr. Chris Mullin: I welcome the statement, which goes a long way towards the major cleansing of the British political system for which some of us have argued for a number of years. Hopefully, it will also end the slide towards money-driven rather than issue-driven politics, and we shall return to issue-driven politics. I have just one or two queries.
First, I welcome the £20 million cap, but does my right hon. Friend not think that £20 million is too high and that it is a desirable objective to reduce by as much as possible the amount of money that is swilling about in British politics? Secondly, one effect of the proposals will be that anyone who has lived outside the United Kingdom for as long as 20 years will still be able to make donations to British political parties. That is as a result of the changes that the previous Government made to the right to vote. Does my right hon. Friend think that there is a case for limiting the right to vote to people who have been outside this country for up to only five years—and, therefore, for changing the eligibility to make donations?
Finally, does my right hon. Friend recall a little scam, whereby the drinks and tobacco industries have the main advertising hoardings in the country all booked up for most of the year, but at election time, they mysteriously and suddenly become available to one political party? Is there anything in the proposals to address that problem?

Mr. Straw: I am grateful for my hon. Friend's remarks. The figure of £20 million is a matter of argument. It is what Neill proposed, and we have sought assiduously in the draft Bill to follow the Neill recommendations in their detail, as well as in their spirit.
On overseas electors for the British Parliament, it is unarguable that if people are on the electoral register to vote in this country, they should be entitled to make

donations to the political party of their choice. There is a separate question about whether the rules laid down in the mid-'80s—which allowed people with a rather distant connection with this country to vote, such as those who have not been resident here for 20 years—should continue. The Select Committee on Home Affairs has proposed that the period be reduced to five years, and we are considering that carefully.
On the drinks and tobacco industries, we are seeking in the draft Bill to control the behaviour of political parties. There are limits to what can or should be done in a democracy, although none of us on this side of the House approves of the way in which the drinks and tobacco industries used to monopolise poster sites on behalf of the Conservative party.

Mr. Richard Allan: We warmly welcome the Home Secretary's proposals—especially for an electoral commission, which we believe to be long overdue. Will he consider accepting our proposal to give the commission a formal role on advising on the question in a referendum, as we believe that to be vital in conducting fair referendums in this country?
Will the Home Secretary consider the implications of devolution for this matter? Party responsibilities for matters such as funding are now, quite properly, devolved to national parties in the various parts of the UK. We hope that he will be sensitive to that, rather than requiring powers to be taken back centrally to parties in London.
Is the Home Secretary concerned that the draft Bill might prevent young people under 18 from becoming subscription-paying members of a political party by confining donations to registered electors? Will he consider that issue, so that we do not exclude from taking part in the political process the young people who often seem to be sadly lacking from it?
Finally, will the right hon. Gentleman reconsider the issue of an upper limit on individual donations? In so doing, he might do his bit to try to end the dependency culture, whereby a party leader becomes so dependent on particular large donors—such as those who give £1 million a year, for example—that he finds it impossible to kick the habit, even when that person has been shown to be fundamentally unsuitable to make such donations?

Mr. Straw: I am grateful for the hon. Gentleman's endorsement of Neill's proposals and our response to them. We are not proposing that the commission should advise on questions in a referendum. Once the commission is established, it will be seen whether that is considered an appropriate role for the commission, which may take the view that advising on the wording of a question in a referendum could lead the commission into partisan areas.
In practice, while there has been argument about the questions in the referendums that we have had in this country in the past 25 years, everyone has known what the issue has been. It has been clear: do we stay in the Common Market, or leave? Do we vote for a National Assembly for Wales and a Scottish Parliament? In future, do we vote for a change in the electoral system, or not? Do we vote to join the euro? It is not a huge problem.
On devolution, I accept the gravamen of the hon. Gentleman's comments. We acknowledge in the draft White Paper that many parties—this applies particularly


to the Liberal Democrats, but increasingly to others—have a federated structure, and we must be sensitive to that. He will understand that, with some small exceptions, the question of elections within the UK is a reserved area, however. We have sought to square the circle properly in the draft Bill but we are open to proposals and comments on whether we have got it right.
There is no proposal in the Bill that should for a second have the effect of preventing a United Kingdom resident who happens to be under 18 from making donations to political parties, but if such a gremlin has crept into the drafting, we shall ensure that it is removed. The purpose of that part of the Bill is to restrict foreign, not under-age donations. We are happy to have donations from people of any age.
The Neill committee considered upper limits on individual donations in some detail. I do not believe that they are practical. It is far more effective to cap spending and have full disclosure of donations than to try to cap what individuals may give. With the best will in the world, if we go down that route we end up with all the complications that have been found in the United States, where, in practice, a level playing field is not secured for the political parties and a great deal of evasion is encouraged, to small purpose.

Several hon. Members: rose—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. A lot of hon. Members want to ask questions and I have to think of protecting the later business, in which many hon. Members have said that they would like to speak. Let us have short questions and short answers, please.

Mr. Robert Sheldon: My right hon. Friend has announced a major change in the way in which the financial operations of elections are conducted, and I expected no less. He rightly started with the Neill recommendations. I am not altogether happy with the upper figure of £20 million, which may be open to discussion, but the most important aspects are the electoral commission and the electoral commissioner. The initiative that the commissioner can show will be available for the first time to keep a close control on the financial operations of elections.
How much time does my right hon. Friend envisage the commissioner being able to devote to the job? Will it be a full-time or a part-time post?

Mr. Straw: I am grateful to my right hon. Friend for his endorsement. He speaks with great experience, not only as Chairman of the Standards and Privileges Committee but as a long-serving former Chairman of the Public Accounts Committee. We will want to draw on his experience, as we want to base the independence of the new electoral commission on the model of the National Audit Office and the Comptroller and Auditor General.
The first part of the Bill gives the commission wide powers and restricts the powers of the Secretary of State, because some changes in electoral law will be able to be proposed in the House only if they have been endorsed by the commission. I would anticipate that the commissioner's would be a full-time post, and there would certainly need to be a substantial number of

full-time staff as well as other part-time commissioners. We intend to ensure that the commission can do a proper and effective job.

Mr. John MacGregor: As a member of the Neill committee, I warmly welcome the Government's acceptance of the vast majority of our recommendations, and in particular those on referendums, both because there was some doubt whether the Government would accept them and more especially because it was very clear to us in the hearings that we held around the country that the funding arrangements for the earlier referendums under the present Government left a great deal to be desired.
The Home Secretary referred with approval to the Neill principle that strong and healthy parties are essential to the functioning of a strong democracy. The second part of the sentence to which he was referring goes on:
as a means of engaging very large numbers of people … in the whole democratic process.
In that respect, the recommendation for tax relief on small donations from large numbers of people was, we thought, crucial. One of the effects of our recommendations and the Government's acceptance of them will be some diminution in donations from other quarters, hence the importance of encouraging such donations to fill the gap. Will the Home Secretary think again about tax relief?

Mr. Straw: I am grateful to the right hon. Gentleman, and especially for his welcome for what I said about accepting the regime for referendums. I am aware that a canard was flying that there was some doubt about the Government's position, but I made it clear, in an interview on the day that it was issued, that we welcomed the whole of the report. The right hon. Gentleman will remember that, in the debate in early November, I again made clear our acceptance of the referendum proposals.
I understand that the right hon. Member for South Norfolk (Mr. MacGregor) has strong views about the proposals to make small donations to political parties tax-deductible. The Government take a different view. We are of course open to representations, although they would have to be very strong to make us change our mind. I do not accept that the degree of people's involvement in a democracy would depend on whether they could get tax relief on their donations.
We have a pretty vibrant, working democracy in this country. Not enough people are involved in the system, and all political parties would like more people to get actively involved in politics. They would also like politics, through civics courses, to become more central to the education of the nation's children. There are other ways of achieving that, and I believe that if there is a case for giving state aid to political parties—including state aid for political education—that aid should be given explicitly, rather than through the happenstance of individuals' donations on which tax could be deducted.

Mr. Harry Barnes: Will we have to wait until the electoral commission has finished its work before further reforms to the electoral system, beyond those in the White Paper, are introduced? I am thinking especially of a rolling register to cover the millions of people missing from existing registers, and of the registration of homeless people. If those reforms are


to be blocked because the electoral commission will be required to finish its work first, some of us would consider that the cart had been put before the horse.

Mr. Straw: I can give my hon. Friend the assurance that he seeks. We will not have to wait for the electoral commission to complete its work. Indeed, as the Under—Secretary of State, my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth), has already announced, we have separate proposals from the all-party electoral working party for other changes to improve the process, and they include the introduction of a rolling register.

Mr. Dafydd Wigley: I generally welcome the Home Secretary's statement, but I seek clarification on two matters. First, will funds from outside Wales be allowed to be given to political parties fighting elections to the National Assembly for Wales? Secondly, will the electoral commission be relevant to the Assembly, and to local government in Wales?

Mr. Straw: I know of no way in which we could prevent motor vehicles travelling across the Severn bridge from carrying donations to the Welsh Assembly. The idea that we could recreate Offa's dyke, fill in all the gaps and thereby put a wall around Wales is not a proposition that even the right hon. Gentleman would want to pursue. The proposals that I have set out are for the whole of the United Kingdom.
The right hon. Gentleman asked about local government in Wales. That is a reserved matter, but the organisation of local government boundaries in Wales is a devolved matter for the National Assembly for Wales. The White Paper makes it clear that, if the National Assembly wished the review of those boundaries to be taken over by the electoral commission, we would be open to making provision for that.

Mr. Dennis Skinner: I have to say that this statement is a darn sight better than the one before it. [Laughter.] Does my right hon. Friend agree that trade unionists in particular will be very pleased at the announcement that shareholders will be able to subject donations to a vote of approval?
Does my right hon. Friend the Home Secretary recall that a few years ago I proposed to the Labour party's national executive committee that a sum equivalent to the amount that a political party spends on all its candidates in an election would be sufficient as an upper limit? That amount is roughly £6 million now. Will he have another look at that proposal?
Finally, will my right hon. Friend accept from me that this is a most opportune statement? It could not have come at a better time, especially given that the Tories are run and financed, year on year, by Mr. Ashcroft. Will he also understand that, in the run-up to a general election—more than at any other time—the Labour party must set the agenda? That is what this proposal does.

Mr. Straw: I thank my hon. Friend for the tenor of his remarks. His point about trade unions is important. We submitted party funding to an independent committee

comprised of people of all political persuasions and none. We asked it to consider the matter independently and impartially, and to implement proposals. The committee said that no change was required in the regime for trade unions, but that huge changes were necessary in respect of company donations.
I contrast the way in which we have proceeded with the way in which the previous Conservative Government ruthlessly sought to hobble Opposition parties in a wholly partisan way. They hit in particular at the Labour party's sources of funds while protecting their own. Their sources included donations from companies in the UK and abroad, but also from very shady individuals, including Asil Nadir. It remains to be seen whether the Tory party has given back his £400,000.

Mr. Gerald Howarth: There, we have had the true motive behind the Home Secretary's statement. He should accept that this action is, in some respects, an act of reprisal by the Labour party and that aspects of it will effectively hobble the Opposition. The Government are not content simply to have an overwhelming majority in the House, with destroying any opposition in the other place, or with having a supine load of journalists mesmerised by the power of the Prime Minister's press secretary.
Does the Home Secretary accept that some of his proposals—in particular, the decision to require disclosure of donations in excess of £5,000—will hobble the Opposition? Does he agree that many people will be deterred from giving fairly modest sums to political parties—as the Home Secretary says that he wants them to do—because the right hon. Member for Hartlepool (Mr. Mandelson) will set investigative journalists on them to dig up as much dirt as possible? Does he agree that that will not improve the democratic process?

Mr. Straw: If this had been a reprisal, I would have been conducting it under friendly fire. The hon. Gentleman should have seen the face of the right hon. Member for Maidstone and The Weald (Miss Widdecombe) as he spoke. The proposals are based on an independent report, which the Conservative Front-Bench team has demanded—having done a full pirouette from the previous position—that we should implement in full. That is precisely what we have done, and I am very sorry to have discomfited the Conservative spokesmen.
The hon. Gentleman remains unreconstructed, taking the view held by a former treasurer of the Conservative party, Lord McAlpine, whose solution to party funding was entirely straightforward. Lord McAlpine said:
I do not think that we ever should have shown how we spent our money. The Conservative Central Office is not a charity dedicated to helping the sick and suffering,"—
perhaps an open question these days—
it is a fighting machine dedicated to winning elections.
He also wrote:
There was a black hole in the Party's finances … The solution was easy: we gave up publishing accounts.
That was the approach then taken by the Tory party. I am glad to see that those views remain represented, red in tooth and claw.

Dr. George Turner: Can my right hon. Friend say more about what will happen with


shareholders? Many shareholders are pension funds that hold their power on behalf of others. Many of us do not want our pension funds to do what many have done in past and fund the Tory party on the false premise that it is good for the economy. This Government have shown that the Labour party is good for the economy. Surely our companies should not be involved in party politics unless their shareholders overwhelmingly say so.

Mr. Straw: The principle that my hon. Friend lays down was accepted by the Neill committee, and we set out our response to that on page 26 of the White Paper. We propose, as Neill did, that there should be a requirement on company directors to seek shareholder approval for donations, including donations that involve non-commercial sponsorship. Neill proposed that the cycle of approval should take place every four years. That is in the draft Bill, but we are open to suggestions as to whether it should occur more often.

Mr. Peter Brooke: Pursuant to the question of the hon. Member for Sunderland, South (Mr. Mullin), can the Home Secretary confirm that the 20-year rule was part of a Bill, passed quickly at this time of year in 1989, which also increased the limits on by-election expenditure, that such a Bill cannot in a narrow space of time be passed without bipartisan support and that all aspects of that Bill—before publication and including the 20-year rule—were agreed by Lord Hattersley, the shadow Home Secretary, on the advice of Walworth road?

Mr. Straw: I do not know all the detail, but I can confirm that the Representation of the People Act 1989 was a bipartisan Act, and that my noble Friend Lord Hattersley was shadow Home Secretary at the time. The right hon. Gentleman is therefore correct but, 10 years on, that does not mean that, because something was passed with bipartisan support, it should not be open to review. The proposal should be open to review. We seek on this issue, as we have on electoral processes, to proceed as far as possible on a bipartisan basis.

Mr. Martin Linton: Does my right hon. Friend agree that, with this Bill, he has put within our grasp an end to sleaze in the funding of political parties? Does he agree that those who opt out of paying tax in this country should also opt out of funding political parties, at least for five years until they are no longer on the electoral register, in line with the principle in the Neill report that funding of political parties should be limited to those who live, work and carry on business in the United Kingdom?

Mr. Straw: I hope and believe that my hon. Friend is correct to say that the proposals in this Bill will help clean up British politics and put an end to sleaze in the funding of our political process. On the restrictions on overseas donors, we want the political process to be funded by those who have a stake in it. That is why we seek a ban on foreign donations, whether from individuals or companies. We define that by reference to the domicile of the company but also by reference to whether an individual is on the electoral register.

Mr. Martin Bell: I wish also to query the proposed £20 million limit for a political party campaign.

That seems to me an extraordinary amount of money that will keep parties spending more than they can safely raise and keep them beholden to the big contributors. Surely a cheaper politics is a more trustworthy politics. Perhaps we could, for as little as £2 million or at the most £5 million, take politics out of the hands of the big contributors and give it back to the people.

Mr. Straw: The sum of £20 million was that proposed by Neill. It is important that the limit should be realistic. I apologise to my hon. Friend the Member for Bolsover (Mr. Skinner), who also made that point, for failing to answer it.
The simple truth is that the original regime that we now operate was established at the end of the previous century when almost all election spending took place at a constituency level. There was virtually no national party spending, and the dates on which elections took place varied from one part of the country to another. It is interesting that the total level of spending at a constituency level at the end of the 19th century was, in real terms, very substantial, and ran to much more than is spent today at a constituency level because the constituency was the focus of the campaign. Today, for reasons that everybody understands, there is a greater focus on the national level.
Neill was correct to say that the regime should recognise that arrangement, but the committee has also proposed to reduce for future elections the amount that was spent at the previous election. I recall that the Conservative party is reported to have spent about £27 million at that election, and the Labour party £26 million. I think that £20 million is therefore a reasonable restriction. If the figure were much lower, the restriction would not take account of the realities of modern campaigning.

Mr. Dale Campbell-Savours: In the case of institutional shareholders, would pension funds and insurance companies be required to consult their policyholders before using their votes at annual general meetings on political funds?

Mr. Straw: No, they would not. That is a separate but very live issue about the degree to which those who exercise shareholder power consult the beneficial interest, which is typically those who have put money into a pension fund, and how they do so through trustees. We are strongly supporting measures to strengthen the role of trustees in the control of pension funds.

Mr. Alasdair Morgan: I welcome the statement in principle. The Home Secretary will know that, in Scotland, the political parties came to an agreement along the same lines before the recent election there. I refer him to the jocular reply that he gave the right hon. Member for Caernarfon (Mr. Wigley) earlier regarding spending by UK parties in devolved elections. Does he agree that the transfer of funds and resources from London to Edinburgh or Cardiff during or before such an election is a serious issue? Given that he has already distinguished in his statement between local and national donations, will he consider that matter further?

Mr. Straw: Unless we were to put walls around different parts of the United Kingdom and abandon the


single currency that was introduced for England and Scotland in 1707, it would be impossible to work out how, in practice, we could prevent donations being made to Scottish political parties by people in the rest of the United Kingdom. Furthermore, I do not believe that to be desirable within what is a union of this kingdom.
The Bill contains clear regulations regarding the donations that people make to political parties in Scotland and elsewhere, and a clear regime for the spending of those political parties. I appreciate that the hon. Gentleman will not have had time to read the White Paper but, if he looks at page 40, he will see, set out in column D, the proposed spending limits for the Scottish Parliament. Obviously, that figure is pro rata. The limit is £1.5 million for each political party in a general election for the Scottish Parliament, compared to £20 million for parties in a national general election. That is a sensible way to proceed.

Mr. David Winnick: Is it not downright scandalous that the whole dirty, murky world of party financing was not touched on by the Conservatives for obvious reasons, particularly because they used money that was known to be stolen?
I press my right hon. Friend again on the question of tax exiles. Why should someone who is technically a British citizen and entitled to vote here but who, for obvious tax reasons, ensures that he or she does not spend more than 90 days a year in the UK be in a position to finance a political party? Such a case is, of course, in the news, and demonstrates that the Tory party is almost exclusively dependent on such a tax exile. We need to change that, and I tell my right hon. Friend that, if that is not dealt with in the Bill, some of us will hope to press an amendment, which is likely to be supported by our hon. Friends.

Mr. Straw: My hon. Friend was entirely right to draw attention to the disreputable record of the previous Conservative Administration in refusing to clean up British politics because they knew that the spotlight would turn on the murky record of the Conservative party.
I am glad to welcome converts, wherever they come from, but I remind Conservative Members that, when the mere suggestion was made that the issue of party political funding should be referred to the Nolan committee, the then Prime Minister, the right hon. Member for Huntingdon (Mr. Major), said,
I do not believe that that is the right way to proceed."—[Official Report, 21 May 1996; Vol. 278, c. 95.]

The Conservatives did not want an inquiry because they did not want it to reveal what they knew to be the truth. Their view was the view of Lord McAlpine—that the best way to avoid scrutiny was simply to avoid having any accounts.
I understand the concern of my hon. Friend the Member for Walsall, North (Mr. Winnick) about people who are tax exiles, but it seems to me that the position of tax exiles must be dealt with through Finance Bills. It is unarguable that, if someone is lawfully on the register to vote in this country, that individual must be allowed to make donations to a British political party that is registered in this country. I do not understand how we could retreat from that principle, although I appreciate that amendments may be tabled to the Bill from all quarters, and I look forward to the argument on them.

Dr. Julian Lewis: Is not the Government's response to recommendation 89 of the Neill committee grotesquely inadequate? That recommendation established the following principle in these words:
The government of the day in future referendums should, as a government, remain neutral and should not distribute at public expense literature, even purportedly 'factual' literature, setting out or otherwise promoting its case.
There is no mention there of the 28-day limit that the Government are putting in, in their so-called acceptance of that recommendation. Is it not blindingly obvious that the Government intend to raid the public purse on a massive scale in the months leading up to a referendum, stopping only a meagre four weeks before polling day?

Mr. Straw: The hon. Gentleman never improves his case by the hyperbolic way in which he presents it. He is wrong. We are putting in place, in statute, restrictions on expenditure by Government that his Government would never have dreamed of. We can have an argument about whether 28 days is the precise period—I am happy to do that—but the 28-day period follows the principles that Governments of both parties have followed in respect of what is call the election purdah period for elections that take place within a Parliament, and we intend to stick to the principles in the Bill, not only to their letter but to their spirit.

Several hon. Members: rose—

Madam Speaker: Thank you. We are now going to move on. We shall be coming back to these matters again later.

Personal Statements

Kali Mountford: Madam Speaker, with your permission I should like to make a personal statement.
In response to the 10th and 11th reports of the Standards and Privileges Committee published today, I should like to apologise to you and to the House. I regret that I find myself in this position and that my actions have caused difficulties for members of the Social Security Committee and the Standards and Privileges Committee. What started out as a genuine attempt to be helpful to the deliberations of the Social Security Committee unfortunately went very wrong.
Unfortunately, because of personal and family problems coupled with a series of health problems resulting from surgery that was not successful, I have not been able to spend as much time as usual in and around the House. Had I been able to be here, I might have had a fuller grasp and understanding of the implications of these procedures and not done things which, on reflection, were rather silly. I have of course sent my resignation to the Chairman of the Social Security Committee and apologised to the members.
I fully accept the findings of the Standards and Privileges Committee. I deeply regret my actions and apologise both for my original error of judgment and my delay in being totally forthcoming in this matter.

Madam Speaker: Thank you, Ms Mountford.

Mr. Don Touhig: With your permission, Madam Speaker, I shall make a personal statement.
The Select Committee on Standards and Privileges, in its 10th and 11th reports published today, has made criticisms of my behaviour concerning a draft report of the Select Committee on Social Security. I want the House to know that I accept fully the judgments of the Standards and Privileges Committee, and apologise unreservedly to the House for my part in this matter. The circumstances, which are referred to as "mitigating", are set out fully in my statement to the Standards and Privileges Committee, as are my reasons for declining to name a colleague without that colleague's permission.
I believe that hon. Members should accept reports of the House that are critical of them. It is the duty of each of us to take responsibility for our actions, and I do not shirk that duty today. Finally, I am deeply grateful to you for allowing me to make this unreserved apology to the House at the earliest opportunity.

Madam Speaker: Thank you, Mr. Touhig.

Points of Order

Mr. Quentin Davies: On a point of order, Madam Speaker. I am grateful for the opportunity to raise a point of order that goes to the heart of the way in which the Government discharge their obligation to be straight with Parliament and the public.
Last Thursday at Treasury questions, the Chief Secretary to the Treasury said, in relation to the new individual savings accounts, or ISAs:
In the first two months following their launch, savers invested more than £4 billion in them—more than twice as much as was invested in PEPs and TESSAs during exactly the same period last year."—[Official Report, 22 July 1999; Vol. 335, c. 1324.]
This morning there was a raft of press reports on the subject. I quote from page 11 of the Financial Times, which states:
Gross sales of Isas in the three months to the end of June were £1.6 bn compared with £3.9 bn gross sales of Peps in the second quarter of 1998.
[Interruption.] Hon. Members do not like—

Madam Speaker: That is a matter of argument. What is the point of order for me?

Mr. Davies: At first sight, at least, the right hon. Gentleman's statement to the House last Thursday is inconsistent with subsequent reports. Therefore there is great confusion in the press and among the public. I wonder, Madam Speaker, whether the Chief Secretary has given you any indication as to whether he 0intends to make clear in the House a matter that has been muddled by the Government's unhealthy obsession with spin-doctoring and with—

Madam Speaker: Order. The hon. Gentleman is raising policy matters with me. He knows very well that I have no responsibility for the comments made by Ministers or hon. Members. Certainly, I refuse to comment on reports in the national press. [Interruption.] Order. The hon. Gentleman is a Front-Bench Member, so if he wishes to pursue the matter when we come back, he is free to do so—he has the Order Paper—and if he wishes to pursue it while the House is in recess, he can make written representations to the Minister concerned.

Mr. Eric Forth: On a point of order, Madam Speaker. Can you confirm that, at no time today, did you receive any request from the Deputy Prime Minister or the Minister for Transport to make a statement on the matter of air traffic control, and that Ministers were forced to come to the House only as a result of you granting a private notice question to my hon. Friend the Member for North Essex (Mr. Jenkin)?
I ask that because I thought that I heard on the radio this morning—as no doubt you did, Madam Speaker; I know that you are an assiduous listener to the radio in the morning—the Minister saying that she could not reveal anything to the public until she had revealed it to Parliament. Can you confirm that you received no such request from the Minister, until she was forced to come to the House by you, following a request from my hon. Friend?

Madam Speaker: I received no request from any Minister to make a statement today. I did receive a request


from a member of the Opposition for a private notice question. Of course, I used my judgment and the authority given to me by the House to grant that private notice question.

Mr. Tam Dalyell: On a point of order, Madam Speaker. In view of your sympathetic reception yesterday to the points of order raised by my hon. Friend the Member for Halifax (Mrs. Mahon) and myself in relation to the possible ethnic cleansing of Serbs in Kosovo and the dire pollution at Pancevo and other places in Serbia, and given that we shall not be back before the beginning of the Serbian winter, have you had any request from the Foreign Office to make a statement on that urgent matter?

Madam Speaker: I have not been informed by the Foreign Office or any other Department of State that it wishes to make a statement on Kosovo.

Mr. Jeremy Corbyn: On a point of order, Madam Speaker. You will be aware of the huge public concern about the growing of genetically modified crops, and you may be aware of a statement in one of the newspapers this morning to the effect that the Government may be placing a cloak of secrecy over the location of GM crops being grown throughout Britain. Have you had any requests from a Minister to make such a statement and, in view of the seriousness of the possibility of secrecy surrounding crop trials, which have overwhelming implications for many people, do you not think that there should be such a statement?

Madam Speaker: I sometimes wish that I could tell the House what I think about it. On a more serious note, no, I have not received any request to make such a statement today.

BILL PRESENTED

WARM HOMES AND ENERGY CONSERVATION (FIFTEEN YEAR PROGRAMME)

Mrs. Linda Gilroy, supported by Mr. David Chaytor, Mr. Alan Simpson, Mr. Peter Temple-Morris, Mr. Matthew Taylor, Angela Smith, Maria Eagle and Ms Linda Perham presented a Bill to require the Secretary of State to draw up and facilitate the carrying out, over a period of fifteen years, of a programme of action to provide at least 500,000 households per year with a comprehensive package of home insulation and other energy efficiency improvements; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 5 November, and to be printed [Bill 149].

ROYAL ASSENT

Madam Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

Finance Act 1999
Disability Rights Commission Act 1999
Adoption (Intercountry Aspects) Act 1999
Company and Business Names (Chamber of Commerce, Etc.) Act 1999
Commonwealth Development Corporation Act 1999
Football (Offences and Disorder) Act 1999
Access to Justice Act 1999
Youth Justice and Criminal Evidence Act 1999
Pollution Prevention and Control Act 1999
Criminal Cases Review (Insanity) Act 1999
Employment Relations Act 1999
Local Government Act 1999

Funeral Parlours (Planning)(Amendment)

Mr. Oliver Letwin: I beg to move,
That leave be given to bring in a Bill to amend the law in connection with the change of use of premises intended to be funeral parlours.
I cannot claim that the Bill quite ranks with the awesome list of legislation that has just received Royal Assent, and I do not expect that it will have the same success in passing through the various stages that it would need to in the House. Nor, the House will be relieved to know, do I intend to spend more than a minute or two explaining it.
The Bill is a modest measure, which arises from the very same perplexity that was mentioned in the House in an Adjournment debate on 11 June 1999 when the hon. Member for Ealing, North (Mr. Pound) said:
I have no objection to funeral parlours and funeral directors operating in the high street.
I utterly share those sentiments. In the long run, as Keynes said, we are all dead and we need such services.
The hon. Gentleman also said:
The vexed issue of planning and funeral parlours is of great concern to my constituents. For many years, one of my constituents lived next to an excellent local newsagent … where sustenance for mind and body was available … To her horror, one day she found that a funeral parlour had appeared almost overnight in the small parade of shops."—[Official Report, 11 June 1999; Vol. 332, c. 961.]
The strange fact is that, in my constituency of West Dorset in the town of Sherbourne,almost identical events transpired, and one of my constituents woke up one fine morning to discover that an entirely innocuous shop was about to be turned into a funeral parlour. As it happens, my constituent passed her days pleasantly sunning herself in her front garden and did not wish—if I may be forgiven the phrase by the House—to see a procession of stiffs passing her front garden. She thought that she had the usual remedies available to her; that she could go to the district council and ask that her case be put. She expected that the funeral parlour proprietor would then be able to put his case and that the matter would be adjudicated in the ordinary way.
Alas, it so happens that, under the Town and Country Planning (Use Classes) Order 1987, that is not the case. Class Al of that order allows the transformation of any

item in a long list of kinds of business premises to be achieved without planning permission, as long as that transformation is into another of the classes listed in class A 1.
Class A1(f) is entitled:
For the direction of funerals".
I am a profound proponent and supporter of the order in general and there is a desperate need to allow businesses to be flexible and change their premises and for different kinds of businesses to emerge on our high streets, but funeral parlours are not quite like all other forms of shop. They bear rather more resemblance to other things, which are not included in that list and which cause concern to constituents. Hence, they have to go through the planning procedure.
This modest Bill is entirely intended to bring to the attention of the officials and Ministers responsible the urgent need to remove paragraph (1) from class A 1. That would hardly make major legislative history, but it would have the beneficial effect that neither my constituents nor those of the hon. Member for Ealing, North would awake on any day to find that such a horrible event had occurred without the slightest redress being available. If there is a purpose for ten-minute Bills and for private Members coming to the House to try to change legislation or to bring such matters to the attention of officials, this is a classic example of that purpose.
My constituents in Sherborne feel extremely strongly about this matter, which has probably attracted more attention from the local press than most of the great matters of state. I suspect that they and the constituents of many other Members around the House would be profoundly grateful if the Government took the appropriate steps, even though I foster no illusion that the Bill is likely to be passed.

Question put and agreed to.

Bill ordered to be brought in by Mr. Oliver Letwin, Mr. Geoffrey Clifton-Brown, Mr. Eric Pickles and Mr. David Lidington

FUNERAL PARLOURS (PLANNING) (AMENDMENT)

Mr. Oliver Letwin accordingly presented a Bill to amend the law in connection with the change of use of premises intended to be funeral parlours: And the same was read the First time; and ordered to be read a Second time on Friday 5 November, and to be printed [Bill 150].

Orders of the Day — DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation) and Order of 15 July,

DATA PROTECTION

Queen's recommendation signified.

That, in respect of service in the period starting with 1st April 1999 and ending with 31st March 2000, the salary of the Data Protection Registrar shall be £66,290 per annum.—[Mr. Hill.]

Question agreed to.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

ROAD TRAFFIC

That the draft Courses for Drink-Drive Offenders (Experimental Period) (Termination of Restrictions) Order 1999, which was laid before this House on 12th July, be approved.—[Mr. Hill.]

Question agreed to.

Orders of the Day — Economic Stability and Public Services

[Relevant documents: Bank of England Annual Report 1999 and the Eighth Report from the Treasury Committee, Session 1998–99, on the Monetary Policy Committee—Two Years On (HC 505).]

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hill.]

The Chief Secretary to the Treasury (Mr. Alan Milburn): This extremely welcome debate allows the House the opportunity to discuss the Government's approach to modernising our economy and to modernising—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I apologise to the Chief Secretary; I should have said at the outset that Madam Speaker has decided that there should be a 15-minute limit on Back-Bench speeches in the debate.

Mr. Milburn: I, too, shall bear that in mind, Mr. Deputy Speaker, and I am sure that my hon. Friends and other hon. Members will be immensely relieved to hear it. The Government are pursuing twin objectives: the creation of an enterprise economy and the creation of a fair society. Creating wealth is the way to create jobs, opportunity and prosperity, but an enterprise economy requires a society in which the talents of all our people are deployed to the full. When we came to office, we inherited failures in both the economy and our public services. They in turn reflected outdated means of making economic and public spending policy. Modernisation of both is the key to creating a dynamic economy capable of sustained growth and reliable public services capable of meeting modern needs.
On 1 May 1997, we set ourselves two key objectives to help to build a stronger economic future for Britain: first, the establishment of a new economic framework to secure long-term economic stability and to put an end to the damaging cycle of stop-go and, secondly, to begin to strengthen Britain's productive potential by tackling the long-standing weaknesses of the British economy with policies to increase employment opportunities, to raise Britain's productivity performance and to build a fairer society. We had to do that against a background of mounting uncertainty and instability in the global economy. The economy that we inherited from the previous Government was set to repeat the cycle of boom-bust that has been the British disease for the past three decades or more.

Mr. Andrew Tyrie: Does the Chief Secretary think that the economy is in an upswing or a downswing, or have the Government abolished the business cycle?

Mr. Milburn: I shall come to the details of where we are—[Interruption.] If the hon. Member for East Worthing and Shoreham (Mr. Loughton) would calm down for a moment, I shall have a word or two to say to him before too long. I shall come to the detail of where we are in the economic cycle in a moment.
As the hon. Member for Chichester (Mr. Tyrie) is aware, we have been creating a form of economic stability that this country has long longed for: low inflation, low


interest rates and employment growth. Most outside commentators now accept the forecast of between 1 and 1.5 per cent. growth, which the Government made in the pre-Budget report last November. At the time, the Conservatives and many independent commentators pooh-poohed that, but thankfully, independent commentators are coming round to the Government's way of thinking.

Mr. John Bercow: rose—

Mr. Milburn: I spy an hon. Gentleman who is coming round to the Government's way of thinking.

Mr. Bercow: I fear that it is a case of the right hon. Gentleman seeing pigs fly before his very eyes.
While the Chief Secretary mulls over the question of whether the economy is in an upswing or a downswing, may I ask him another question? What assessment has he made of the European Commission's proposal, in February 1999, for the imposition of lower rates of value added tax on labour-intensive industries?

Mr. Milburn: I know that the hon. Gentleman is obsessed with Europe. Indeed, the Conservative party has increasingly become a one-issue party: its sole obsession is Europe. I remind the hon. Gentleman that this debate is about economic stability and public finances, which is precisely what my speech will be about.

Mr. Geraint Davies: Does my right hon. Friend agree that the Conservative party's muddled position on Bank of England independence given yesterday—that the issue should be referred to a commission to look at the workings of the Monetary Policy Committee—shows that, had the Tories been in power, we would have had two years of muddle? We would not have had the lowest short-term interest rates for 30 years and the lowest long-term interest rates for 40 years, inflation would have been out of control and the economy would have been in chaos.

Mr. Milburn: My hon. Friend is absolutely right. The shadow Chancellor is not even at first base on those issues. I presume that he aspires one day to be Chancellor of the Exchequer, but he cannot even answer the most basic question about monetary policy: is he in favour or against independence for the Bank of England? We do not need a review; we simply need him to answer yes or no. I am happy to give way to Conservative Members now if they can confirm the Conservative party's position on this. Apparently, they cannot.
The Conservative party's record speaks for itself. When we came to power, consumer spending was growing at an unsustainable rate, inflation was set to rise sharply above target once again, and there was a large structural deficit in public finances. By no stretch of even the most fevered of Conservative Members' imagination could that be described as a "golden economic legacy". Rather, we inherited an economy flawed by serious and fundamental weaknesses.
During the 18 years in which the Conservative party was in government, Britain's growth was substantially below the G7 and European Union average and we suffered two deep and damaging recessions. During those

18 years, Britain had lower investment levels than any of the member states of the Organisation for Economic Co-operation and Development. We also had higher average inflation than any other major industrialised country, with one exception—Italy.
When this Government took office, our first priority had to be to secure long-term economic stability. The events of the past two years demonstrate beyond all doubt that, in a world of ever more rapid international financial flows, monetary and fiscal stability is the precondition for economic success. We achieved that by setting clear objectives, establishing proper rules and requiring openness and transparency in the way in which we do business.
On clear objectives, price stability through a pre-announced inflation target—a symmetrical target, I remind the House—and sustainable public finances through tough fiscal rules—

Mr. Robert Sheldon: Obviously, the Government are to be congratulated heartily on controlling inflation. That has been quite splendid and fully successful. However, there is the problem of house prices. Although there is an attempt to include an aspect of that in the retail prices index, it is not very successful and the matter is becoming increasingly serious. Will my right hon. Friend say something about that problem?

Mr. Milburn: I understand my right hon. Friend's concerns about these issues. In pursuing and creating economic stability, we also want to achieve a stable housing market. I have listened carefully to what some of the major lenders have to say about the current state of the market. My right hon. Friend may be interested to know that the Halifax has said:
The current favourable affordability position will continue to underpin a healthy housing market over the remainder of 1999, we see no evidence to suggest that the market is returning to a 1980s style boom.
We have been pursuing policies for economic stability by setting out clear objectives. The golden rule is that over the cycle we balance the current budget. The sustainable investment rule requires that, as we borrow for investment, debt is held to a prudent and stable level.
There should be well-understood rules. We have a new system of monetary policy making, at the heart of which is the independence of the Bank of England and its open letter system, and an equivalent and equally important set of fiscal procedures that are legally enshrined in the code of fiscal stability.
We must also have transparency in policy making, with an open system of decision making in monetary policy through the publication of minutes, a voting system and full reporting to Parliament. We should have the same openness and disclosure in fiscal policy, with key fiscal assumptions independently ordered.
Those are the new rules of the game. They are especially important for Britain, which, more than most nations, has been subject to boom-bust cycles and changing policies.

Mr. Nick St. Aubyn: The Minister says that those are the new rules of the game. Will he confirm that those rules fail to satisfy the Maastricht treaty in the degree of independence given to the Bank of England?

Mr. Milburn: The hon. Gentleman should direct that question to his right hon. Friend the shadow Chancellor—Maastricht man—because he is the man who signed the Maastricht treaty.
Giving operational independence to the Bank of England for setting interest rates is at the heart of the new framework that we have established. Before the House today is the Bank of England's first annual report to be published under the new monetary policy framework. The new style accounts are welcome. They contribute to the greater accountability and transparency that we envisaged when the Bank of England was reformed. For the first time, the Bank's annual report is on a statutory basis. It is particularly welcome to have a clear statement of the Bank's objectives and strategy, to have a director's report reviewing the Bank's performance against its objectives, and much more information on how the Bank uses its own resources.
The aim of the new financial framework established by the Bank of England Act 1998 is to provide proper incentives for the Bank to make efficient use of its resources in pursuit of its functions, and to make it more transparent and more accountable, especially to Parliament, for what it does. It is still early days, but we believe that the Bank is on the right track. Indeed, that view is confirmed by the report of the Select Committee on the Treasury on the work of the Monetary Policy Committee, which was issued yesterday. I thank my right hon. Friend the Member for North Durham (Mr. Radice) and his colleagues on the Committee for their hard work in producing it.
The Committee's report underlines the success of the new framework. The Government will respond to the points raised in the usual manner. The report agrees that the Chancellor's decision to reform the monetary policy framework has been vindicated over the past two years. I particularly welcome the Committee's agreement with the Chancellor on two key points. First, that maintaining the same inflation target for a period of time adds to the credibility of our inflation policy. Secondly, that the symmetrical inflation target adds important flexibility to ensure that deviations of inflation below the target are taken just as seriously as deviations of inflation above the target.

Mr. Crispin Blunt: The Chief Secretary says that he welcomes those changes. The Bank of England's report states that one of the objectives is to manage the Bank's resources responsibly. How can he square that with the Government's enforced sale of the Bank's gold reserves?

Mr. Milburn: That is an extremely tired old tune—a tune that, unfortunately, was partially interrupted during our last Treasury questions. Perhaps that is why the hon. Gentleman wants to return to it.

Mr. Bercow: He wants to return to it because it is valid.

Mr. Milburn: We are happy to debate these issues, but the fact is that, like other major industrialised nations—

both in Europe and elsewhere—we are determined to give the United Kingdom a balanced portfolio of reserves, and that is precisely what we have done. We held too much stock in gold, and not enough in other currencies. We balanced the portfolio, and I would have expected the hon. Gentleman, and other Conservative Members, to welcome that.

Mr. Blunt: rose—

Mr. Geraint Davies: rose—

Mr. Milburn: I give way to my hon. Friend.

Mr. Davies: As my right hon. Friend is no doubt aware, the report of the Select Committee on the Treasury says that the activities of the Monetary Policy Committee staved off recession. Does it not follow that, had we not advocated the independence of the Bank of England under the Conservatives, we would not have staved off recession—a quarter of the world is in recession now—and would have returned to the Tory years of unemployment, spending cuts and higher taxes?

Mr. Milburn: My hon. Friend puts his case—and indeed, the truth—very succinctly.
The Committee's report underlines the success of the new framework. As I have said, the Government will respond to the points raised in the usual manner, but the key point is this. Despite some of the reservations expressed in the report, now, for the first time, interest-rate decisions are made in the long-term interest of the British economy rather than for short-term political reasons.
There were doubts at the outset about the rightness of this approach, many of which were expressed in the House at the time. It is now clear, however, that it is delivering the goods. As my hon. Friend the Member for Croydon, Central (Mr. Davies) just said, inflation is low, and is expected to remain close to target. What is more, for the first time in generations we can look forward to a period of sustained low inflation.
Interest rates peaked at 7.5 per cent., and the Bank of England has been able to cut them seven times in just 10 months. Short-term interest rates are now at their lowest for over 20 years, long-term interest rates are at their lowest for over 30 years, and mortgages have not been cheaper for a generation. We have been steering a course for stability in what are uncertain and troubled times for a global economy.
Of course we cannot build a modern enterprise economy overnight. With a quarter of the world in recession, trading conditions have been difficult for many firms, and we know that that is especially the case for manufacturers. But, as we indicated in last year's pre-Budget report, the economy is set to grow by between 1 and 1.5 per cent. this year, and by between 2.25 and 2.75 per cent. next year. Nor should we lose sight of the fact that, even now, employment continues to grow. It has risen by 400,000 since the general election, and more people are in work than ever before. Long-term unemployment—I hope that Conservative Members in particular will welcome this news—has fallen by more than 50 per cent., and youth unemployment by more than 60 per cent. Conservative Members' constituencies,


among others, have been net beneficiaries of those dramatic improvements in the fortunes of many thousands of people.

Mr. Oliver Letwin: Why, in that case, did the Chief Secretary—along with his colleague the Chancellor of the Exchequer—decide to tighten the fiscal screws by £40 billion, necessitating those low interest rates in an attempt to rescue the economy from the downturn that he thereby created?

Mr. Milburn: As I explained to the hon. Gentleman during the early part of my speech, when we came to power we inherited an economy that was structurally flawed and, moreover, in which inflation was clearly back in the system—not surprisingly, perhaps, given that the previous Government had ignored all the Bank of England's advice about interest rate policy. They made the classic error which, I am afraid, has been repeated time and again over the past 20 or 30 years. Short-term political considerations forced changes to the economy which, in the long and indeed the medium term, did not prove beneficial for the economy or for other people.
Everyone now sees that Bank of England independence is working—everyone, that is, with one exception. Conservative Members have never supported Bank of England independence. [Interruption.] Oh, some did. They are about to come out of the closet on the last day of the parliamentary Session. That is very welcome. A last-minute conversion is better than no conversion at all.

Mr. Tyrie: As I made clear in a speech when the Bank of England Bill was going through, I have been sympathetic to Bank of England independence for many years. Indeed, I was involved in the working up of a proposal for a measure of Bank of England independence in the mid-1980s, when the Labour party vigorously opposed any form of Bank of England independence. It did not even have the courage to put it clearly in its manifesto before the people at the last election.

Mr. Milburn: The only small piece of advice that I have for the hon. Gentleman is to keep his head down if he wants promotion in today's Conservative party, because the policies that he advocates will not find favour. The Conservative party's position was to vote against the Bank of England Bill; it voted against Bank of England independence. It has restated its opposition on countless occasions since then. Last October, the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), said:
We would not have given up control of interest rates in the first place".
The Leader of the Opposition said:
They"—
the Government—
have given up control of interest rates when they should have kept hold of them.
The right hon. Member for Wokingham (Mr. Redwood), who is always forthright in his views, said:
We think it was a big mistake, we opposed it at the time, we said no good would come of it".
Now they say that they are having second thoughts about it.
The truth is that the Conservatives are at sixes and sevens on Bank of England independence. They can see Bank of England independence working, delivering the goods and providing the economic stability that our country needs, but they still yearn to scrap it. They hanker for the days when it was politicians who set interest rates—the days of the late 1980s and early 1990s when they decided to put up interest rates to 15 per cent. and when inflation was in double figures.
Today's Conservative party has learned nothing from those past failures. Making the Bank of England independent has helped Britain to steer a course for stability. The Conservatives would put all that at risk by returning us to the era of stop go, which was so damaging to the long-term interests of the British economy.

Mr. Barry Sheerman: Will my right hon. Friend give way?

Mr. Milburn: I will give way one more time and then I must make some progress.

Mr. Sheerman: Is my right hon. Friend being a little unfair to the Conservative Opposition because at least there is some fancy footwork going on? Does he not agree that they have realised what a terrible mistake they have made in opposing independence of the Bank of England? They have realised that they must change their mind and have set up some committee, which will report that they should change their mind and let them off the hook. They do not have the guts to say that they made a mistake and were wrong.

Mr. Milburn: My hon. Friend is right.

Mr. Howard Flight: Under the present arrangements, does fiscal policy, or monetary policy have priority? My understanding is that the brief to the Bank of England is to set monetary policy in the light of the Government's fiscal policy. Therefore, in that sense, the Bank does not operate independent monetary policy.

Mr. Milburn: The hon. Gentleman, who claims to know something about these issues, should make a much more serious point than that. He knows fine well that, unlike in the late 1980s and early 1990s, fiscal policy and monetary policy are working together. That is right for this stage in the economic cycle. I presume from his remarks that he continues to oppose—

Mr. Flight: indicated dissent.

Mr. Milburn: Oh, the hon. Gentleman does not continue to oppose Bank of England independence. He had better confer with the right hon. Member for Wells (Mr. Heathcoat-Amory) because I suspect that he might have a different view. Certainly, the hon. Member for Grantham and Stamford (Mr. Davies) has a contrary view to the right hon. Gentleman, so those on the Front Bench had better get their position sorted out.
Precisely because we now have a more transparent, more open and more accountable system of running both fiscal and monetary policy, we can get the two working together. It is not the late 1980s and early 1990s, when


monetary policy and fiscal policy clashed, with all the damage that that did to the British economy, but a period when fiscal policy and monetary policy are working together. The results are clear: low inflation, low interest rates, unemployment down and employment up.

Mr. St. Aubyn: rose—

Mr. Milburn: Have I given way to the hon. Gentleman?

Mr. St. Aubyn: indicated assent.

Mr. Milburn: In that case, I will make some progress.

Mr. Barry Gardiner: Will my right hon. Friend give way?

Mr. Milburn: I will.

Mr. Gardiner: My right hon. Friend has said that those on the Opposition Front Bench must get their policy right, but does he not agree that they do not have one policy—in fact, they have three policies? As he has pointed out, the hon. Member for Grantham and Stamford (Mr. Davies) is clear. He has gone on record many times. He has a good track record on the issue. He agrees with the Government. Why he is on the Opposition Front Bench, goodness only knows, but that is not my right hon. Friend's responsibility. The hon. Member for Arundel and South Downs (Mr. Flight) is clearly maintaining the party line on the issue—he says that it should not change—and there are those who want to kick it into touch with the commission, so there are three different party lines on the issue.

Mr. Milburn: If only my hon. Friend were right—I suspect that it is many more than just three. That is just the Front Benchers. As we have heard, there are many different positions among those on the Conservative Back Benches. I hope that that review of the policy on Bank of England independence continues for many months.

Mr. Edward Davey: May I ask the Chief Secretary a hypothetical question? If there were a danger of the Conservative Opposition returning to government, would not their lack of clarity on what is a key issue threaten economic stability in Britain?

Mr. Milburn: I was going to call the hon. Gentleman my hon. Friend because he was so nearly on-message. He is absolutely right. The Conservatives' stated policy is to return us to the bad old days of stop go, boom bust. That is precisely what we have taken out of the equation by giving, rightly, operational independence to the Bank of England. That is not a decision just for today or tomorrow. It should be a decision that all parties can agree on in perpetuity.
Meanwhile, the Government are determined to go on making decisions for the long term. Frankly, we have had too much of short-termism. It has brought instability to companies and uncertainty for taxpayers. In the modern world, creating a platform of economic stability is the essential pre-condition for long-term economic success.
That is what the Government have been doing in the past two years: getting the fundamentals in place for lasting long-term prosperity. However, stability is a necessary, but not a sufficient condition for a successful economy. Our challenge is to raise the trend rate of growth in the UK. To do that, we are taking action to improve productivity, investment and skills.
We have done so by cutting tax rates for businesses, by investing in science and in research and development, by encouraging competition, by investing in and reforming our education system, by creating employment opportunities and by making work pay through the new deal, the minimum wage, the working families tax credit and the 10p starting rate of income tax.
All those are policies that will benefit Britain both now and in the long term. They represent a decisive break from the failures of the past, yet they are all opposed by the Conservative party. It has simply failed to understand that the old ways of economic policy making simply will not do in the new global economy. Similarly, the old ways of public spending policy have passed their sell-by date.
I say that for three reasons. First, in today's global economy, any country that ignores the need for fiscal responsibility will soon be punished. Secondly, the old annual cycle of public spending produced a mirror reflection in the public sector of the short-termism that bedevilled much of the private sector in the British economy for many decades.
Thirdly, the old ways of making public spending decisions did not focus properly on what really counts for the public—not the level of expenditure, but what we get out for what we put in.
Today, after two years of reforms to get the fundamentals right, we have re-organised how public service is conducted, and we are changing the way in which public services are run. We have made three major changes.
First, we have established clear and transparent rules for the conduct of fiscal policy. The golden rule and the sustainable investment rule mean that fiscal policy will operate in a manner that keeps borrowing under firm control and requires current taxpayers to pay for current spending, because they benefit from it.

Mr. Tyrie: Will the right hon. Gentleman give way?

Mr. Milburn: No; I shall push on.
A stable and prudent debt ratio will ensure that fiscal policy is run responsibly and does not threaten the stability of the economy or impose an undue burden on future generations.
As I said, we inherited a situation in which the national debt had doubled and public finances were running out of control. However, our prudent and decisive action has cut public borrowing by £32 billion in the past two years and brought public debt down towards 40 per cent. of gross domestic product. The current Budget is in balance, and, in the next five years, total net borrowing will be lower than in any single year in the previous Parliament.
Only today, I have published provisional outturn figures showing that the control total for 1998–99 was more than £2.7 billion below plan. By getting control over the public finances, the Government are now living within our means. Yet, we have also been able to commit


significant extra investment for our key public services: £40 billion extra for health and education; £3.6 billion extra for housing; and £1.7 billion more for transport. Each of those sums is an investment in the future and creating a fair and decent society.
Secondly, we have been able to plan for the long term. Our three-year spending plans give Departments and public services the certainty and stability that they need to plan beyond the one-year time horizon. Departments have been given firm multi-year spending limits within which they are able to prioritise resources and plan ahead, providing a more stable foundation for managing those public services. The new control regime we have established allows underspends to be carried forward and spent on Government priorities, rather than forcing Departments to waste public money on pointless end-of-year spending splurges.
Consistent with the fiscal rules, we have also made a clear distinction between capital and current expenditure, to ensure that worthwhile capital investment is not squeezed out by short-term pressures, as it has been in the past. We are doubling public sector capital investment to modernise Britain's infrastructure.
Since the general election, we have turned the private finance initiative around. We have signed £4 billion-worth of PFI deals, and we have PFI working in sectors, such as health, in which it has not worked before.

Mr. Nick Gibb: If the right hon. Gentleman has, as he says, developed firm three-year spending plans, why was the Chancellor reported, in The Times of 7 June 1999, as saying that he would relax the spending plan for year three and allow Departments to submit new bids for spending in 2001–02—which just happens to be the probable year of the next general election?

Mr. Milburn: I have a very small tip for the hon. Gentleman: he should not always believe what he reads in the newspapers, not even The Times.
Precisely the same warning applies to the hon. Member for Grantham and Stamford—who, a moment before the debate started, was twittering on about individual savings accounts and the House being misled. The truth—as he would know, if he had bothered to read the report in the Financial Times—is that the figures to which he alluded represent only one section of the savings industry and were only an early snapshot. The Association of Unit Trusts and Investment Funds represents only ISA managers who are unit trust firms. The AUTIF figure, therefore, does not paint the whole picture. I therefore advise the hon. Gentleman to believe what he hears from the Government, rather than what he reads in the Financial Times.

Mr. Quentin Davies: I am grateful to the right hon. Gentleman for responding to my earlier point of order. Does he agree that he could clarify the position—and prevent any misunderstanding at all—simply by providing the comparative figures for ISAs and personal equity plans on the basis of comparing tax-exempt special savings accounts with cash ISAs, and PEPs with equity ISAs? If he would do that, we should be absolutely clear on the real position and on the record of the new vehicle—the ISA—as compared with the PEP, and there would be no basis for misunderstanding.
As I said in my point of order, the trouble with the Government is that they are obsessed with all types of spin-doctoring, but will not present to the House clear facts or clear, comparable statistics.

Mr. Milburn: I am extremely disappointed in the hon. Gentleman—I really am. I am very, very disappointed in him. Before the debate, he rang me, asking me to explain the position. I tried to do so, and even faxed him a copy of the press release issued by my hon. Friend the Economic Secretary to the Treasury. However, he has sought to ignore all that. The figures that I gave to the House last week were exactly those that my hon. Friend issued only a few weeks ago in her press release.
We know that the hon. Member for Grantham and Stamford and other Conservative Members do not like ISAs, but savers do—and they are voting with their wallets.

Mr. Tim Loughton: Will the right hon. Gentleman give way?

Mr. Milburn: No, I shall not.
In the first two months since ISAs were launched, savers invested £4.2 billion in them, which is more than was invested in PEPs and TESSAs, put together, in the corresponding period last year. That is what I said then, and it is what I say now. I say it because it is the fact.

Mr. Quentin Davies: rose—

Mr. Milburn: The hon. Member for Grantham and Stamford has made a fool of himself, and I shall not give him an opportunity to do so again—[HON. MEMBERS: "Give way."] No, I will not.
Thirdly, all of that is built on a new approach that emphasises that public spending on our public services is investment in exchange for reform. It is money for modernisation.
Government today are judged on whether their services achieve their core objectives: educating children, treating patients and catching criminals. Therefore, our focus now is quite rightly on outputs, not on inputs—on the products of our spending, not only on the scale of our investment.
The Government's public service agreements are at the heart of the new approach. Published in December 1998, PSAs are a contract with the people—a promise of lasting improvements in their public services. PSAs establish 350 policy targets and 175 efficiency targets that Whitehall Departments will deliver in exchange for the extra investment that we are making. Therefore, although we are making extra—record—investment in our hospitals and schools, £40 billion of extra investment has to result in £40 billion of improvements.
No one is pretending that the Government are able simply to wave a magic wand to transform our public services—transformation will take time, effort and investment. Equally, however, no one should doubt our determination to do so, or the progress that we are already making.
Some hon. Members do not believe in providing our public services with the investment that they need. When we announced our public spending plans, the Leader of the Opposition said:
The Government has been reckless with Government spending".
The shadow Chancellor—who is not in the Chamber today—said:
These are extremely irresponsible reckless commitments that you shouldn't commit the country to".
He also said that
It was madness to embark on this public spending programme".
The shadow Chief Secretary, the right hon. Member for Wells, said that our spending plans
represent a very substantial and dangerous increase in public spending.
There we have it: reckless, madness, dangerous. That is the Tory's verdict on our spending plans. Now, however, Conservative Members say that they want to match our plans. Their position simply does not add up. I say that not only because of what they have said about our public spending plans, but because of what they have done. In debates on the past two Finance Bills alone, they have proposed to take billions of pounds from the self-same services that they now say that they support.
The truth is that Conservative Members are as much at sixes and sevens on public spending policy as they are on policy for Bank of England independence. Try as hard as they might, they simply cannot escape their past.
This debate throws into very sharp relief the key differences between the Labour Government and the Conservative Opposition. The Government have made the Bank of England independent, creating a platform of economic stability. The Conservatives would remove that independence, and take Britain back to the old days of boom and bust.
The Government have introduced the new deal and helped more than 100,000 young people back into the world of work. The Conservatives would scrap the new deal, and turn their backs on a whole generation of unemployed young people. This Government are introducing the minimum wage and the working families tax credit precisely in order to make work pay. The Opposition would scrap both and would land 1.5 million of the poorest families in the land with a £24 a week tax rise. Finally, the Government are investing an extra £40 billion in our schools and hospitals—£40 billion that the Tories would cut if they ever got back into office.
The Labour Government are building a stronger economic future for our country, but the Conservatives would put all that at risk. At the next general election the British people will be faced with a clear choice between today's Conservative party, which is the most extreme in living memory, and this new Labour Government who are working to create an enterprise economy and a fair society that benefits low and middle income Britain alike.

Mr. David Heathcoat-Amory: As the House knows, we recently passed the Finance Bill, which received Royal Assent earlier this afternoon and is now an Act of Parliament. Its contents are depressingly

familiar; it is a massive tax-raising measure that the country regrets. This afternoon, we have an opportunity to debate public expenditure, the other side of the equation.
Of course there is a direct connection—almost a symmetry—between taxation and expenditure, because Governments raise taxes in order to spend and spend what they raise in taxation. However, in this case there is a particular symmetry that the Government may regret and that certainly breaks the promises that they made before the general election. I refer to the fact that there is a huge cumulative tax increase and burden on the country, which by chance is almost exactly matched by the increase in social security expenditure that the Government have announced and is already under way.

Mr. Geraint Davies: Will the right hon. Gentleman give way?

Mr. Heathcoat-Amory: No. I shall give way to the hon. Gentleman later, but I want to develop this point.
It is extremely difficult to get to the bottom of the tax figures in the Government's documents, so we turn to the House of Commons Library which uses figures from Government sources, but strips away the camouflage and gives the true unvarnished picture. The Library has produced a useful table which takes each of the Government's three Budgets so far and analyses the tax increases in the year in question and the continuing increases each year. Thus, we have from an authoritative source a cumulative figure for the tax increases already announced by the Government amounting to a staggering £40.7 billion over the lifetime of this Parliament. That is only an interim figure. If the Government keep to their record it may increase in next year's Budget, but it represents a huge cumulative burden. I refer to facts, not speculation.
The very helpful table that has been assembled for us by the House of Commons Library includes the ending of mortgage interest relief, the increase in stamp duty, the abolition of the married couple's allowance, the insurance premium tax increase and the withdrawal of dividend tax credits that are costing pension funds £5 billion a year and rising.

Mr. James Plaskitt: The right hon. Gentleman expresses a preference for Library source tables. Will he confirm that there is a Library table that shows that when the previous Conservative Government first came to office, the share of taxes paid by United Kingdom residents represented 34 per cent. of gross domestic product, and when they left office the figure was 37 per cent.?

Mr. Heathcoat-Amory: No. We had a proud record of reducing the burden of taxation and the Government are putting it into smart reverse. I understand the hon. Gentleman's attempt to avoid the record, but I am afraid that it exists. I notice that he did not even respond to the point I made, so perhaps he agrees with the cumulative figure of £40 billion. Perhaps he supports it.

Mr. Bercow: We all noticed the attempt by the hon. Member for Warwick and Leamington (Mr. Plaskitt) to distract attention from the uncomfortable facts of the Government's stewardship. Does my right hon. Friend


agree that what he has just told us and what the House of Commons Library figures confirm testify to the uncharacteristic prescience of the noble Lord Hattersley, who observed as long ago as 13 March 1995 in The Guardian:
Labour now has a clear choice. It can either be the party of higher taxation and proud of it, or it can be the party of higher taxes which it is afraid to admit, ashamed to describe and incapable of calculating with any accuracy. It cannot be the low taxation party.

Mr. Heathcoat-Amory: I have already given the House the evidence that Labour is a high taxation party. Some Labour Members choose to welcome it, some choose to criticise it, some choose to admit it and some choose to disguise it—but nothing can alter the facts.

Mr. Geraint Davies: Will the right hon. Gentleman give way?

Mr. Heathcoat-Amory: No. I know that the reshuffle is imminent and the hon. Gentleman wants to catch everyone's eye, but I want to fill in a little bit of the other side of the equation.
I mentioned social security expenditure, but again the figures are opaque. Nowhere in the Budget report is a clear description of social security expenditure. For instance, it excludes the large item under the title "Working families tax credit". Initially the Government pretended that that was not a tax measure at all. They called it a tax credit and pretended that it was a tax cut, but even they had to admit that it is actually an item of expenditure. We find on page 178 of the Red Book that income tax credits
score as public expenditure under national accounting conventions.
So they came clean on that one, but they did not include it in the table that lists social security expenditure. Instead, they put it in under an intriguing item called "Accounting and other adjustments", which amount to almost £13 billion a year.
When we add in, as we must, those accounting adjustments, we find that social security expenditure will rise during this Parliament by £38.2 billion. That is what I mean by neat symmetry. Tax is up by £40 billion and social security expenditure by £38 billion. It contrasts starkly with what the Prime Minister promised before the general election, when he said:
as we get the welfare bills down … then we can release more money into education and health and the services where we really want them.
He also said:
By the end of a 5-year term of a Labour Government, I vow that we will have reduced the proportion we spend on the welfare bills of social failure … This is my covenant with the British people. Judge me upon it. The buck stops with me.
It is perhaps unfortunate that the House of Commons Library has provided us with the percentage increase every year. It is quite interesting that in the three years ending in March this year—in other words the last year under the Conservative Government and the two years of expenditure that we left behind—social security expenditure fell by 0.2 per cent. a year in real terms. That has now been converted into an increase of 3.2 per cent. a year. So the Prime Minister is well on his way to breaking his pre-election promise.
It is also odd that there is no reference to that in the very interesting work of fiction entitled, "The Government's Annual Report". One would have thought that, as it was not just a promise by the Prime Minister but a vow—which, presumably, is even stronger—it would have found its way into the Government's report on their own performance. I thought that the Government understood that regulators must be independent. If they wanted someone to write such a report, they should have got someone else. There is not a word in the report about this vow or covenant—despite the fact that the figures show that social security expenditure, instead of being cut, is rising by 3.2 per cent. a year in real terms.

Ms Sally Keeble: If the right hon. Gentleman is so keen on talking about the cumulative costs of social failure, how does he justify the £158.8 billion extra that the Tories spent on unemployment during their term of office?

Mr. Heathcoat-Amory: We had unemployment benefit and, when people came out of work, they received social security expenditure. However, we got unemployment down. Part of the golden economic legacy that we handed to this Government was falling unemployment. All the measures that we undertook to achieve that were opposed by the whole Labour party—all the supply-side measures, privatisations and public sector reforms were resisted by Labour. I am proud that we created an unemployment record in this country which was the envy of the EU. [Interruption.] Labour Members do not like the facts about social security.
I remind the Government that they had a solution. The right hon. Member for Birkenhead (Mr. Field) was put in to think the unthinkable about public expenditure. He did so, and he was sacked for it. By the end of this Parliament, every taxpayer in the country will be paying £17.50 to the social security budget every day, a rise of £70 a week for every taxpayer. That is the price of Labour failure.

Mr. Christopher Leslie: As well as cutting the working families tax credit, would the right hon. Gentleman cut child benefit or disability benefit if he were back in the Treasury today?

Mr. Heathcoat-Amory: Many reforms are necessary to the social security budget. We achieved an annual cut in social security expenditure by the time we left office, so we are not suggesting that the Labour Government do anything that we did not—we delivered, and we put the money into other expenditure items, such as health and education. The Labour Government have promised to bring down the costs of the welfare state and then spend the money on education. They have failed to do that, and the figures that I have quoted show that beyond dispute.

Mr. Sheerman: I know the right hon. Gentleman to be, at heart, an honest man. In his speech, will he address the reality of the Government's fine economic record in terms of inflation, employment and interest rates? Will he say that the Government are doing a pretty good job? The right hon. Gentleman is describing the great success of his Government, who suffered the worst defeat since 1828, whereas we are riding high in the opinion polls because we are delivering economic success day after day. I know that it hurts the right hon. Gentleman and his colleagues


to be in opposition. Every day they must get up and hope that something bad happens to the Government. However, it is all good news, and it is hard being in opposition in those circumstances.

Mr. Heathcoat-Amory: Let us get on to some of the other issues. What about expenditure on the Passport Agency? The hon. Gentleman wants us to move away from social security, which clearly embarrasses the Labour party. The Chief Secretary mentioned the importance of efficiency targets and public service agreements. How come, therefore, the Passport Agency—to take one example—is such a shambles?
We read in the Budget report that there is to be an important-sounding, high-level Cabinet Committee—with the codename "PSX"—to be chaired by the Chancellor to ensure that the performance of Departments measures up to their targets. What went wrong with the Passport Agency? What are the Government going to do about it? They have taken away the charter mark, but will they take away the money? Will the Home Office be punished—or will it get more money—for the demonstrable failure of that part of the Government's service?
What about London Underground? It is a fiasco. Under the efficiency targets, and the tutelage of that important-sounding Committee, will transport get more money, or will it be punished by receiving less?
What about waiting lists? People now must join a waiting list to get on a waiting list. That is a failure—another broken promise. Will the Department of Health get more money, or less? Let us hear from the Government about that Cabinet Committee—or does it meet in secret?
I am willing to refer to other items of Government expenditure, but the overall picture is of a tax-and-spend Government. They have erected two huge pillars—extra taxation and extra expenditure on all the wrong things. [HON. MEMBERS: "Ah!"] That was an interesting response from Labour Members, who apparently believe that an extra £38 billion for the welfare state is the way in which money should be spent. Why did the Prime Minister not tell us that before the election? Why did he promise to cut expenditure? There is some explaining to be done by Labour Members—who must hurry if they are to be in time for the reshuffle tomorrow—of whether they believe in what the Prime Minister promised before the election or not.

Siobhain McDonagh: Would the Opposition scrap the working families tax credit and reverse the tax changes that the right hon. Gentleman has mentioned?

Mr. Heathcoat-Amory: I am coming to the working families tax credit, which is a good example of the churning from taxation to expenditure that is so inefficient. In many cases, the same people who will receive the benefit will be paying the taxes to finance it. People will get the benefit if they have an income of up to £38,000 a year. Those people will be paying taxes to the Chancellor, who will give it to the social services system. The money will be churned round the system, and they will receive back some of the money that they have paid in tax. That is inefficiency and waste.
There is also a direct effect from the massive transfer of money from taxation to expenditure by way of the additional burden on businesses. The British Chambers of Commerce has calculated that, over the lifetime of the Parliament, British business will be paying a cumulative extra tax of £30 billion. Last week, we debated the energy tax. We asserted that the tax would not just be no good for the environment, but would be bad news for manufacturing industry. Industry will be paying the taxes and will receive back only a fraction in the offsetting cuts in national insurance contributions.
We did not know during that debate how quickly we would be proved right by an independent report, published by Business Strategies, which stated that, far from creating jobs, the long-term effect of the energy tax will be to lose 156,000 jobs to the British economy. According to the same independent report, it will widen the north-south divide, and productivity in the British economy, as a consequence of the energy tax, will decline by 0.8 per cent. That is a terrifying indictment of what is admittedly a draft tax, but it is a tax that the Government are committed to—they have already written the £1.75 billion of extra revenue into their Budget estimates.
Taxes are not the only problem; there is also the administrative and regulatory burden. Even Lord Haskins, the Labour peer who heads the regulatory task force, has complained that small businesses are being turned into benefit offices for the Government and will not be compensated. The Institute of Directors estimates that the regulatory burden alone will cost British business £5.047 billion a year. That will cost jobs, profit and investment.
The Prime Minister talked about a new partnership between Government, business and industry to improve competitiveness, and called it a new pledge. I do not know whether that is new for the Parliament or for the millennium, but I know that it has coincided with Britain dropping from fourth to eighth in the world league of competitiveness.
The Government's response is a series of gimmicks. To contrast with the £30 billion of extra taxation on business, they announced in the Budget that they were setting up a venture capital fund to give back to industry £20 million through an administratively complex and interventionist measure, whereby civil servants pick the lucky beneficiaries. That is a completely trivial response to a serious problem.
The Government have treated savings in exactly the same way. They say that they want to boost savings as an alternative to spending on welfare, but they put up the taxes on savings. There was a £5 billion a year raid on pension funds and then we had the administrative fiasco of replacing PEPs and TESSAs with ISAs. The Chief Secretary's response to my hon. Friend the Member for Grantham and Stamford (Mr. Davies) was completely inadequate. The industry is recording a drop in the amount going into ISAs, but the Government deny reports from the people who are actually selling the products.
It is not surprising that the savings ratio has fallen. It has fallen all the way through this Parliament and continues to fall. The Government are damaging the wealth-creating process on which all their expenditure plans depend.

Mr. Andrew Love: The hon. Member for Buckingham (Mr. Bercow), in a typically in-your-face


contribution, told us that the Conservative party was the only low tax party. The other side of that equation is that it is also the low public expenditure party. Will the right hon. Gentleman think the unthinkable and tell us where the cuts in public expenditure should fall? If he is suggesting the social security budget, perhaps he will tell us which social security expenditures he wants to cut.

Mr. Heathcoat-Amory: I do not know whether the hon. Gentleman was listening when I described the Government's failure to control welfare expenditure. We did it; they failed. I am asking them to return to the path of expenditure that we laid down. I have also made clear some of my criticisms of the working families tax credit, which is disguised in the Budget report and perversely goes back to many of the people who pay the taxes in the first place.
The Conservative party has always believed in properly funded public services and we supported the Government's expenditure on health and education in so far as it actually went to the classroom and to patient care, but we maintain our opposition to the overall total of Government expenditure, precisely because of the £38 billion extra welfare expenditure, which, interestingly, the Government do not even deny.
The Government's tax-and-spend policy threatens employment. Part of our golden economic legacy was almost the lowest unemployment rate in Europe: the envy of the European Union. It was difficult to achieve, but we did it by understanding that it is a matter not of spending money, but of creating the right conditions for employment to thrive—in other words, lower taxes and fewer regulations.
The Government's new deal is a very expensive way of achieving not very much. The cost per job is more than £11,000. The money is wasted and would get a better return, even in the narrow sense of extra employment, if it were returned to the businesses and the people who create it in the first place.

Mr. Flight: My right hon. Friend spoke of the risk to employment created by the fall in savings. Is not the real risk that investment cannot be sustained to support the type of stable growth to which the Chief Secretary refers if our economy has a lower rate of savings?

Mr. Heathcoat-Amory: My hon. Friend underlines my point about the failure of the savings culture. The Government came in with a professed aim of encouraging savings, and have done everything to reduce them, so the consequence that he mentioned will follow as surely as night follows day.
Sometimes the Government's rhetoric shows some understanding of the issues. The Prime Minister is apparently envious of the job creation record of the United States. When he is there, he seems to realise that lower taxes and fewer regulations are at the root of the United States Government's awesome ability to generate prosperity and employment. The Government cannot do the same here, because they are hooked on the wrong economic model. Instead of converging on the United States economy, they are converging on the European Union economy.
Will the Government now, for the first time, give the figures for the national changeover plan, under which public money is being used to prepare for the euro?

Unspecified amounts have been allocated to fund unspecified items on an unspecified time scale. The time scale is in the hands of either the Prime Minister or the Chancellor—I cannot remember which—who are in dispute over whether to hold a referendum. Meanwhile, money is being spent without parliamentary or public sanction to create an impression of inevitability.
Earlier today, we had the hilarious spectacle of a Minister privatising the air traffic control network without using the word "privatisation". Where does that fit into the Government's fiscal arithmetic? The Budget report has a figure of £4 billion a year inked in for asset sales. Is some or all of that to come from air traffic control? If not all, what else do the Government intend to privatise, or is the figure simply based on hope? The privatisation has nothing to do with improving the performance of the British economy; it is all about dressing up the revenue figures.
The Government should come clean about where they will get their revenue from and how they will spend it. The picture presented in the Red Book is the opposite of the clarity and openness that was promised. The Government have changed most of the definitions that the public understand. The public sector borrowing requirement was a term familiar to the House for many years, but it is now called the public sector cash requirement. The control total, another term familiar to the House, has been abolished. Privatisations are called public-private partnerships and, as I mentioned earlier, expenditure on social security is now dressed up as accounting and other adjustments.
How will the public come to understand the taxes that are being paid and their application unless the Government bring clarity to their documents? Those documents cannot disguise the fact that the Government's instincts and habits, demonstrated over their three Budgets, are to raise taxes. It is also clear, from this and other debates, that they cannot be trusted with the resulting public expenditure.

Mr. Giles Radice: Giving the Bank of England operational independence as part of the new framework for economic stability was a bold and courageous move by the Government. The report from the Select Committee on the Treasury was published yesterday and is one of the documents relevant to this debate. It shows that the move is paying off already.
The arguments for the Bank of England's operational independence—for an independent monetary policy—were strongly supported by two former Conservative Chancellors, and by the hon. Member for Grantham and Stamford (Mr. Davies), my former colleague on the Select Committee. He will remember that the arguments for the change were that it would bring greater credibility, more transparency and accountability, greater stability and a better inflation record—after all, most countries with independent central banks have a better inflation record than those without.
The report concludes that it is probably too soon to reach a definitive judgment on the record of the Monetary Policy Committee, because it takes 18 months to two years for the full impact of the committee's decisions to work through to inflation outcomes. However, the Committee was able to say with confidence that the MPC


had made a highly successful start. It has established its credibility, judged by inflation expectations. Long-term interest rates have fallen sharply, and gilt yields have also fallen. According to independent forecasters, public expectations have not kept pace with the new environment, but the MPC has achieved credibility.
In addition, inflation has been on target, or near it, throughout the period, with the worst outcome only 0.7 per cent. above target. The MPC has managed that without tipping the economy into recession. That major success was achieved because the MPC took prompt action when recessionary dangers loomed by cutting rates swiftly and sharply, by 2.5 per cent. We should also praise my right hon. Friend the Chancellor of the Exchequer for setting a symmetrical target. That has given the MPC far greater flexibility to use rates to bring inflation down and to do so in a way that protects employment.
Finally, the MPC's record on transparency is also very good. We know the voting records of its members and, although it is not yet possible to associate individuals with arguments or opinions, that is a matter to which we shall return. The publication of the minutes is now very prompt, thanks to a request from the Select Committee. Also, members of the Monetary Policy Committee have answered questions with openness and frankness when they have come before the Select Committee, and in public as well.
That is totally new. I remember Lord Lawson, when he was Chancellor, coming before the Select Committee in the 1980s. When he was asked about his policy on interest rates, he said that he put up interest rates when he wanted to, and lowered them when he wanted to: further than that he would not go. Nowadays, the arguments behind decisions are exposed to public debate.
The Monetary Policy Committee has responded to other suggestions from the Select Committee. It has reduced the time taken to publish the minutes of its meetings, as I said. The Select Committee asked the MPC to explain the transmission mechanism—the effect on interest rates of changes in interest rates. That is the sort of question that ordinary people ask, and the MPC gave an explanation. We also asked the committee to survey what the public think about inflation, and to determine people's inflation expectations. Such innovations are very useful.
As I have shown, the Select Committee found that the Monetary Policy Committee had made an excellent start in terms of transparency, credibility and adherence to inflation targets, while at the same time avoiding recession. Although it cannot be denied that those achievements have been accomplished against a benign inflationary background, the MPC had to take into account last autumn's major shock to the world economy. It has not been entirely plain sailing for the MPC, but it has responded quickly and well.
The Monetary Policy Committee has also learned by experience. It has been argued that too many small steps have been taken, moving interest rates 12 times in a period during which the US Federal Reserve moved them only three times. There has been some argument to the effect that the increase in rates in June 1998 was not the right move, and that the MPC was working from faulty information. Even so, the committee's record is good.
The Select Committee report contains some suggestions for improvement. To make the process more predictable, the MPC should consider adopting the policy of the US Federal Reserve bank's open market committee of announcing a bias in future policy after each meeting. That might be a useful innovation.
The Select Committee also noted a problem with the status of the inflation forecast—a criticism levelled by the International Monetary Fund. Given that the Monetary Policy Committee is now responsible for monetary policy, it should assess its inflation forecasts regularly. Also, greater emphasis in the MPC's inflation report on external inflation forecasts would allow comparison with the Committee's own forecasts.
The Select Committee report also identifies an important role for the Court of the Bank of England. It is right that the members of the Monetary Policy Committee should be experts, but the Court of the Bank of England represents regional and sectoral interests. As well as overseeing the MPC, it should represent those interests effectively.
I turn now to the question of accountability. Without blowing the Select Committee's own trumpet excessively, I should like to put it on record that the Committee has managed to establish a credible system of accountability. The system used to be pretty poor—there was no golden age of accountability before the Monetary Policy Committee was set up. Leading academic and City experts now give on-the-record briefings. Those experts include Charlie Bean, David Miles, David Walton, Roger Bootle and Bridget Rosewell, to whom I pay tribute. There are regular hearings on the inflation reports, at which members of the MPC are questioned closely about their thinking and decisions.
Reports are made to Parliament, and today I am talking about the sixth such report that has been compiled. Candidates for membership of the MPC are first sent questionnaires and are then subject to confirmation hearings to assess their suitability, competence and independence. I understand that the Opposition are worried about this last requirement, but I can assure the House that it is checked as part of the confirmation process to which all members of the MPC are subject.
Although there has been one reconfirmation hearing, the Select Committee has been commended by the Bank of England and the Treasury for the conduct of the confirmation hearing process. I should like the hearings to be given a statutory basis, but that is an argument for the future. We shall continue to make the MPC accountable by requiring it to explain its decisions and the thinking behind them.

Mr. Sheldon: rose—

Mr. Radice: I shall give way because I have injury time.

Mr. Sheldon: I should put it on the record that the confirmatory hearings pursued by my right hon. Friend have been a source of considerable gratification to all Select Committees. He introduced the hearings himself,


and they have been extremely valuable. The reconfirmation hearings that he has mentioned today will be of even more value in the years to come.

Mr. Radice: I thank my right hon. Friend for those remarks, although it is not I but the Committee, some of whose members are in the Chamber, who deserves his remarks.
We want to make judgments on the decisions and actions of the MPC where appropriate. We shall put forward constructive suggestions for improvement where necessary, and we shall report to Parliament, the Bank of England and the Government. It is welcome that the Opposition are considering our policy, and I hope that they will use the evidence that we have collected about the process over the past two years.

Mr. Tyrie: May I give the right hon. Gentleman a little more injury time? Does he agree that it would be a good idea to have more outsiders on the MPC, and fewer people from the Bank? Does he think that MPC members should be given longer terms, and that terms should be non-renewable so that members cannot be subject to influence or the concern that they may not be reappointed?

Mr. Radice: The hon. Gentleman's final two points are worth considering and we have made suggestions on them. The balance is about right at present, but those are matters for consideration.
The House of Commons is often criticised—usually by the press, whose members, naturally, are not listening to this debate. Select Committees also come under fire from the press, although journalists—particularly from the specialist press—at least attend them more often. However, the Select Committee on the Treasury has played an important and constructive role in expanding accountability, and will continue to do so.

Mr. Edward Davey: I congratulate the right hon. Member for North Durham (Mr. Radice) and his Committee on an excellent report, much of which the Liberal Democrats entirely agree with. The right hon. Gentleman rightly touched on the need to put confirmatory hearings on a statutory basis. A former Chief Secretary to the Treasury—he is now the Secretary of State for Social Security, though we do not know whether he will remain so after today—promised that a Minister would discuss with the House confirmatory hearings for all public appointments once there had been a chance to review their role. Some time has passed since then, and the Government should produce a full report on whether hearings have a role to play in our democracy.
I agreed with what the right hon. Member for North Durham said in reply to the hon. Member for Chichester (Mr. Tyrie). There is a need for greater independence for the Bank of England, and I hope that the Select Committee on the Treasury will continue to push for it.
I was disappointed by the speech of the right hon. Member for Wells (Mr. Heathcoat-Amory), who seems to favour recycling, since much of what he said was very familiar. It would have been nice to hear about the Conservatives' alternative economic policy, or at least about whatever policy review the party is setting up now.
He failed to address the key issue in today's debate—economic stability. How would the Conservatives promote it?
The Government are right to make economic stability a key objective of macroeconomic policy. Ending boom and bust—to coin a soundbite—is incredibly important if we are to raise the trend rate of economic growth, to ensure a clear framework for investment for the private and public sectors and to increase economic growth and reduce unemployment.
The Government have been vague about their definition of economic stability. Presumably they use some key variables—interest rates, exchange rates, investment and inflation—but they have never been clear about what they mean by economic stability, and we must try to analyse their performance by examining those variables. The right hon. Member for Wells mentioned the Government's annual report, which was published yesterday, and which rightly referred to the Government's success on inflation and interest rates.
By building on the independence that they gave to the Bank of England, the Government have achieved a good record on inflation and interest rates. Risks remain on inflation, such as the possibility—receding and less strong than it was a few months ago—that the pound might collapse, thus importing inflation. House price and asset price inflation are possible worries, but the Government's record is broadly good, and the forecasts are good. The inflation position is certainly better than that achieved by the Tory Government.
The Government are right to say that both long-term and short-term interest rates are low, historically speaking. However, when compared with those of our competitors in Euroland, Japan and the United States, the record is not quite so good. The Government must be aware that both nominal and real interest rates are key factors in business investment and our ability to compete in the world. A question remark remains over the Government's record on interest rates.
The growth record is also not as good; growth has been relatively low. The Government, with the help of the Monetary Policy Committee, have avoided recession, but as much by good fortune as good management, with some helpful developments in the international economy.
Much of the success has been built on the independence of the Bank of England, an idea borrowed from the Liberal Democrat manifesto. However, how can the Bank's independence and accountability be improved? Our view—established for a long time, and without the need for any review in the middle of a Parliament—is that greater independence is needed, along with longer, possibly non-renewable, terms for MPC members. Allowing the Bank to set the inflation target itself would be a strong move towards independence, and it would reassure markets of the Bank's credibility.
As the Government promote convergence and prepare, through the changeover plan, to move towards the single currency, they will be required to change the statutory framework for the independence of the Bank of England, as the hon. Member for Guildford (Mr. St. Aubyn) said in an intervention that was neatly sidestepped by the Chief Secretary to the Treasury. Perhaps we could set up a cross-party committee to consider how to meet our Maastricht obligations—including Conservative Members, now we know of their greater interest in these matters.
I shall turn to the Conservative position, as the new review is extremely interesting. [HON. MEMBERS: "Which one?"] The one mentioned in The Independent yesterday and promoted by the shadow Chancellor. We are halfway through a Parliament, but the official Opposition—astonishingly—do not know what their policy on the key macroeconomic issue is. The players in the game are the former deputy leader of the Conservative party, who toured Britain to hear about Tory policy, and the shadow Chancellor, who signed the Maastricht treaty. They know all the issues. After a long time in the House debating the issues, they should know their minds—but apparently not. They cannot set out a clear position, and that beggars belief.
Perhaps it is all because the Tories have to do such a massive U-turn. The Chief Secretary to the Treasury stole some of my quotes from Conservative Members about their previous position, but fortunately I still have one from the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), whom I am pleased to see in his place. In the Bank of England Bill Committee, he said:
The Treasury should have the power to give direction to monetary policy."—[Official Report, Standing Committee D, 25 November 1997; c. 90.]
He was clearly against the Bank's independence then. I wonder whether he and his colleagues still hold that position.
As I said to the Chief Secretary, this is a crucial issue. As we approach the next general election, the markets, the people and business will need to know the position. If the official Opposition really believe that they have a chance of returning to power, they need to assure the markets that there will be economic stability under Conservative economic management. If they cannot answer such a basic question, the markets will be concerned about the prospect, even though it seems rather dim today.
The Government's record on economic stability is not completely positive and rosy. One indicator gives many people inside and outside the House concern: the exchange rate and its impact on manufacturing industry. The Treasury Committee mentioned in its report the problems that the strength of sterling is causing our exporters. That aspect of stability and economic management was not mentioned in the annual report published yesterday. There was no mention of the Government's support for a stable and competitive pound, which we have heard in many other contexts. There was no indication of progress towards that. It is worrying, because the strength of sterling is creating such imbalances in the economy, with the manufacturing sectors and some regions being severely squeezed by its strength while others are not.
The Governor of the Bank of England's evidence to the Treasury Committee made it clear that the strength of sterling causes him and his colleagues on the Monetary Policy Committee great difficulty in setting monetary policy. The two-speed economy that its strength has created is a problem, but so far we have heard little from the Government about how they intend to tackle it.
This is a major failing in the Government's macro-economic record. They could act by changing the fiscal policy mix and promoting a debate on what they

believe to be the sustainable level of sterling. That will be important in the run-up to sterling joining the single currency. As my hon. Friend the Member for Twickenham (Dr. Cable) has said in other debates, unless we ensure that sterling enters monetary union at a competitive rate, we could lock in uncompetitiveness for years. That would be a strategic error. Unless the Government start tackling the issue and at least promote a debate, there is no way that that instability can be addressed.

Mr. Peter L. Pike: The hon. Gentleman makes an important point about manufacturing industry. Obviously, the pound is a problem for exports, but is sufficient emphasis put on imports? The value of the pound means that raw material and component prices are relatively low. Industry gains with one hand but is at a disadvantage on the other.

Mr. Davey: I take that point, but manufacturers and exporters are unambiguous about their concern over the high pound. Often business is not at one, as we know too well from the euro debate, but it is at one on its problems with the pound.
I hope that the Minister will give some sign of what the Government are planning and how they will tackle this cause of instability. Will they turn over to the committee dealing with the national changeover plan the task of debating the sustainable rate of sterling? That way forward could have a real impact on the level of pound in the market.
It may be that the Government have not been clear on exchange rate policy because of their difficulty with euro policy. If so, there is a danger that exchange rates will be a source of future instability. The Government need to tackle that. The prospects for sterling are worrying. It is uncompetitive with respect to the euro. It is odd that some hon. Members think that a weak euro shows what a disaster the single currency is. German, French and Italian exporters are delighted that it is weak. It is not that weak historically: it has returned to the level of member currencies on a trade-weighted basis two or three years ago. The level of the euro is helping Euroland and disadvantaging our exporters. Many businesses in this country would give their hind legs to have such a competitive exchange rate and interests rates as low as they are in Euroland.
The prospects for the pound faced with a weak euro are worrying, but in the next few months there may be problems with a weakening dollar. It is not inconceivable that the bubble on Wall street will burst in the summer. Such crashes have often occurred in summer or early autumn. That would probably be accompanied by a fall in the dollar. A depreciating dollar would be super-competitive, and with a super-competitive euro, how much greater would the squeeze on our exporters be?

Mr. Radice: If the dollar weakens, the euro is likely to strengthen. We would benefit from that, as the hon. Gentleman rightly noted. The nightmare scenario is unlikely.

Mr. Davey: The right hon. Gentleman may be right, but as cross-currency variations are difficult to predict, my scenario is all too likely. The current level of sterling means that this country is not in a good position to face that possibility.
There is a paradox in the Government's position on the euro. They say that their economic policy is successful in promoting convergence, but press briefings and the lack of clarity in their position on the timing of referendum on the euro show that they are not prepared to say when it will be. That is odd. If they are saying that they have a successful policy on convergence, they should be able to be clear about the timing of the referendum. When do they expect their policy on conversion to succeed? Will it be in two, three or four years? I hope that they will come clean. Instead of allowing it to gain currency that they may be ready to rule out a referendum in the next Parliament, they should be more forceful and set out a timetable for it.

Mr. Letwin: The hon. Gentleman is making an intelligent, serious speech. Can he explain what he understands by the term "convergence"?

Mr. Davey: There are the Maastricht convergence criteria, but unfortunately the House is not judging the Government's performance on convergence by them; we have the five tests. And the problem with them is that they are very elastic.

Mr. Letwin: They are meaningless.

Mr. Davey: They are potentially meaningless, as the hon. Gentleman says. That does not get the Government off the hook on which I am trying to impale them: the need to be clear on the timing of the referendum. Some Labour Members would like their Front-Bench colleagues to be clearer.

Mr. Bercow: Further to the hon. Gentleman's reply to my hon. Friend the Member for West Dorset (Mr. Letwin), on what basis would he be satisfied that the five economic tests had been met not temporarily but permanently? What would satisfy him that convergence was anything more than a meeting of ships that pass in the night?

Mr. Davey: The Liberal Democrats do not share the Government's adherence to those five tests. We do not believe that they are the correct five tests, so we reject them as the measures of true convergence. We believe that the Maastricht criteria, which other countries view as the correct measures of convergence, are still correct. I expected that when I started to bring the euro into the debate I would get a few interventions from Conservative Members.
I turn now to public services. If the Government are trying to remove boom and bust from macro-economic management, they are enhancing it in the management of public services. Their adoption, for the first two years of this Parliament, of the Conservatives' spending plans, followed by the introduction of the comprehensive spending review to try to increase expenditure, is not a sensible way to plan investment in public services. We are witnessing the legacy of that error of judgment early in this Parliament.
One of the Government's three key objectives is
to deliver efficient and modem public services
and to raise standards and quality. However, if they cannot achieve greater coherence and long-termism in their public expenditure planning, they will fail to meet that objective.
The Government say that they are using two tools to improve public services: public spending itself, and the management and focus of that spending. There have been a few small improvements. In certain areas, there has been a slight increase in spending compared to what we might have expected if the Conservatives had been returned in 1997. However, in general, the Government's record on public services is not very good. There is a lack of sustained high spending on key services such as the police, education and the health service, but the Government are also failing to ensure that the money is spent properly.
On overall levels of spending, the comprehensive spending review's only real achievement is to stop Labour Members whingeing on about levels of public expenditure. They can parrot, like a mantra, the figures of £19 billion and £21 billion. However, they are not focusing sufficiently on how those resources are being spent, and to what effect. In so doing, they are making a serious political mistake.
Education has, according to many criteria, received more money than any other service. There has been a real-terms increase in education spending of 3 per cent. per annum. Historically, that is not bad. However, if one is ambitious for our children and our schools and one wants to highlight the importance of education, one finds that figure tame, rather than impressive. It is only slightly higher than the 2.6 per cent. real-terms increase achieved in the first five years of the Government led by the right hon. Member for Huntingdon (Mr. Major).
The annual report published yesterday reveals that in the fourth year of this Parliament, there will be an increase of 0.1 per cent. in the share of national income devoted to education. That follows a fall of 0.1 per cent. in the first two years of this Parliament. It is not a good record.

Mr. David Ruffley: By how much would the hon. Gentleman increase education expenditure in real terms, and how would he pay for it?

Mr. Davey: No one can criticise the Liberal Democrats for not being clear about our spending proposals and how we intend to pay for them. We have published alternative Budgets and costed manifestos. If the hon. Gentleman's party would explain its public spending proposals, he would have a leg to stand on.
We need far more money to ensure that the size of primary school classes for all ages falls to 30 or below. We need to ensure that teachers are properly paid so that we can attract more highly qualified graduates into teaching. I visit primary and secondary schools in my constituency, and it is clear that we still have major cash problems. There is a desperate need for urgent investment in modern information technology equipment. Schools where class sizes for five, six and seven-year-olds are falling are losing money from their revenue budget, so the Government are not making good the effect of their reduction in class sizes on schools' annual budgets. That is creating problems and schools are having to lay off staff.
My constituency experience leads me to believe that the Government are not treating different areas fairly. They continue to view areas such as Kingston as uniformly leafy, as if there are no problem areas or pockets of deprivation within the constituency. I can assure the


House that there are such areas in Kingston, and unfortunately when so little cash is going around, places such as Kingston are the last to receive any.
Other public services are experiencing significant cuts. The police are the most obvious example in my constituency. The Government said that they would improve policing. In many of their pre-election statements, they said that there would be more bobbies on the beat. However, the number of officers in England and Wales has been slashed by more than 1,000 since the general election.
If Labour Members are in any doubt about whether that cut has had an effect, they should come to my constituency, where there is a rash of vandalism and graffiti because there are not enough beat officers. We have lost more than 50 such officers in the past four years, so that was partly under a Conservative Government, but also under this Government. The police are unable to respond as quickly to 999 calls, to walk the beat, to get to know young people and to try to deter crime. In Chessington, Malden Rushett and Hook in the south of my constituency, there is now one beat officer for a population of more than 10,000. Clearly that is wrong.
It is not only the amount of spending that is important, but how that money is managed. The Chief Secretary to the Treasury made much of the public service agreements that the Government published last December, but it is odd that even though those agreements are an important part of the way in which the Government want to manage public services, we have had no statement about them. There has been no debate about that so-called revolution in the management of public services. Are we expected to take those agreements seriously? Were they just an afterthought in the comprehensive spending review—they were introduced six months later—or a fundamental part of it? If the Government and Parliament are not taking those agreements seriously, we cannot expect civil servants to take them seriously.
We were promised an annual report on public service agreements. When will that happen? We want to know whether those agreements were negotiated between spending Ministers and Treasury Ministers or whether they were a diktat from the Treasury. Were they signed? What status do they have? If they are to be the crux of future public expenditure decisions, we need to know what role they will play in budget setting. Will budgets be determined by those targets for outputs and outcomes, or will they be determined after the budget-setting process? If the agreements are not completely integrated with that process, they will have no effect on the way in which money is spent.
The only analysis of public service agreements that the House has seen has come from the Select Committee on the Treasury, which published a useful report last month. The Chief Secretary gave evidence to the Committee, and when we read what he said about public service agreements, we begin to realise how crucial Ministers perceive them to be:
Public Service Agreements have different definitions. If you like, they set out agreements within Government, first of all, about the level of improvements that we want to see in our public services, in exchange for the extra investment we are making in those services".

Those agreements are therefore central to the Government's policy of improving public services. However, it is evident from the Treasury Committee's report that those agreements were almost written on the back of an envelope, as an afterthought.
The Committee said that
insufficient attention was paid to building quality of service into targets".
It recommended that
targets should be published in draft",
so that there can be a proper debate. It said also:
We disagree with the Chief Secretary's view that the setting of targets is solely the responsibility of central Government";
in other words, local government and other agencies need to be involved. The Committee also recommended external auditing of those targets and the progress in achieving them. It said that there should have been
publication of a set of principles establishing the ground rules
for those targets. The Committee is absolutely right. If public service agreements represent a fundamental change in public expenditure, far more thought needs to be given to them.
Liberal Democrat Members do not disagree with the notion of public service agreements. The movement to output and outcome budgeting would be extremely sensible. We would be much clearer in our minds about what we were trying to get from the money that we take in taxes. There could even be a beneficial effect on spending; Conservative Members might well be interested in that. If we can have greater clarity about the targets that we are trying to achieve with public money, public money may be focused more effectively, and we may need less of it.
Public service agreements are a great tool for increasing the accountability of the civil service to Ministers, and of Ministers to Parliament, because they create far greater openness about what public expenditure is intended to achieve.
However, if the Government are not prepared to debate public service agreements in the House, we must question what role they envisage for those agreements. There are many problems with public service agreements, and it is important that they are got right. I mentioned the domination of the Treasury in the setting of the agreements. We need to know whether the correct targets have been set.
The Government said in their annual report, published yesterday, that they had published 600 targets. Where was the debate in Parliament on those 600 targets? Are they the right ones? Have MPs had an input into the setting of those targets? Can we be sure that there will be continuity and consistency in the targets? How do they relate to previous targets that the civil service has been given in setting public expenditure? Those crucial questions need to be answered if we are to improve public services.
We need to know what penalties will result from failure to meet performance indicators. Will cuts in the funding of public services result? I believe that, if so, hon. Members will be very worried, because if something is failing and the automatic penalty of a cut is imposed, we may get a vicious circle, resulting in a continuing degradation of public services. Those are key questions, on which the House has not deliberated before today.
My hon. Friend the Member for Gordon (Mr. Bruce) and I were privileged enough to travel to New Zealand to find out how output and outcome budgeting worked in practice. [HON. MEMBERS: "Oh."] I hear some remarks from Labour Members. I declared that trip in my annual report, which I published to my constituents last year, so I have no concern about that.
On that trip we learned, as a result of talking to politicians and chief executives of the various departments in New Zealand, that although the system focused attention on the efficiency of spending, there were many dangers, such as the mis-specification of contracts and of targets. In addition, we learned that if one tried to include absolutely everything in specified measures, one could miss out on things such as the public service ethos—on the way the public service serves the whole population. Those problems have not been debated.
We hope that public service agreements will deliver what the Government say that they are intended to—the modernisation of public services and reform. However, the Government made a serious mistake by depriving Parliament of its ability to contribute to ensuring that the PSAs are right.

Mr. David Kidney: Can the hon. Gentleman confirm, to complete his very fair summary of the Treasury Select Committee report on public service agreements, that the Committee also recommends that Select Committees review the public service agreements of the Departments that they supervise?

Mr. Davey: I can confirm that, and I hope that Select Committees will act on that recommendation. I also hope that they will act on a recommendation made by the Select Committee on Procedure, on which I serve. Just this week we published a report entitled "Procedure for Debate on the Government's Expenditure Plans". It is a very radical report, and it would also place on Select Committees more obligations to examine expenditure.
On entering the House, I was amazed by how poorly we analyse public expenditure; it is a real sham. The Conservative Euro-sceptics talk about the importance of parliamentary sovereignty. I am afraid that, under their stewardship, Parliament has not performed its key role in terms of parliamentary sovereignty—that of scrutinising Government expenditure.
The information that we are given is poor. It will improve with resource accounting and budgeting, but it is still fairly abysmal. The resources of Members in their offices, and of the Select Committees, are tiny. In its report, the Procedure Committee recommends that each Select Committee have more financial advisers attached to it, to give it support in analysing spending plans.
However, the key point of our report is that the procedures of the House do not allow hon. Members really to hold the Government to account on motions. We say:
we consider that when motions are directed to future plans, motions recommending that 'in the opinion of the House' increases in expenditure or transfers between certain budgets are desirable, should be permissible.
If we could pass such motions, we could significantly improve the quality of debate on public expenditure.
The House can play a major role in improving public services. I ask the Government—I hope that the Minister will give some hint of this when she winds up—to allow

hon. Members on both sides of the House to play a role in improving public services, and to help us to contribute our experiences from our constituencies to the debates and enable—

Mr. Letwin: What the hon. Gentleman is saying now is of great interest. Is he saying that the Liberal party is at least beginning to move towards being in favour of line by line appropriations?

Mr. Davey: I do not see how the hon. Gentleman read that into my remarks. What I am in favour of is a radical revolution in public expenditure management, in terms of resource accounting and budgeting, in terms of three-year planning and in terms of the ability of the House to pass motions to change the Government's Budget. That would be a radical change. I hope that Ministers will accept the Select Committee's report.

Ms Sally Keeble: I welcome the debate, which deals with two of the biggest challenges facing any Government—the management of the economy and the financial management of public services. I am sure that the hon. Member for Kingston and Surbiton (Mr. Davey) shares many of the aspirations that Labour Members share about public services. Unfortunately, the Liberal Democrats have not yet produced financial plans that match their aspirations, or plans for service delivery that would deliver what they say that they want to achieve for the country.
The management of the economy and the financial management of public services are two of the challenges that this new Labour Government have met. We have provided economic stability, we have managed public finances, we have ensured that public funds are not wasted on the consequences of economic failure and we have put public money into the public priorities—health, education, the eradication of child poverty and the ending of youth unemployment. Those were the challenges that the last Tory Government so disastrously failed to meet. I want to consider some of the consequences of their failure, and of the leaden—not golden—legacy that they left to the present Government to sort out.
First, I want to consider the Tories' record on the economy, especially the number of unemployed and the unemployment rate. I was astonished by the remarks made by the right hon. Member for Wells (Mr. Heathcoat-Amory); I can only assume that he has not studied the unemployment figures for a while. I have in my hand a list—produced not by the Labour party but by the Library—of the unemployment rate for each of the years since 1978. It shows that, in the last full year of the Labour Government—1978—the unemployment rate was 4.3 per cent. In the first full year of the Tory Government, it was 5.1 per cent. In the last full year of the Tory Government, it was 7.3 per cent., and in the first full year of the present Labour Government, it was 4.7 per cent. That shows fairly clearly that it was the Tories who produced record levels of unemployment and who failed to deal with unemployment, and that Labour has consistently supported policies to deal with unemployment.
I also want to consider the costs of unemployment. The global figure for the Tories' 18 years was £158.8 billion. Under the last Tory Government alone, the cost was


£48.9 billion. It astounds me that the Tories seem to gloss over the fact that they spent that sum on unemployment, yet they begrudge the £40 billion that we propose to spend on education and health.

Mr. Gibb: Is the hon. Lady aware that, in one year alone, 2003–04, her Government will spend £118 billion on social security?

Ms Keeble: I have been careful to speak about particular areas of spend. Certain areas are worth spending on as an investment, but to spend on unemployment, as the Conservative Government did, was a disgrace. It cost the country a huge amount in lost skills, and cost many members of the public a huge amount in lost life potential.

Mr. Bercow: Will the hon. Lady give way?

Ms Keeble: I shall deal first with incapacity benefit. That cost was also an outrage. Between 1979–80 and 1994–95, the number of people on incapacity benefit almost trebled, at a cost of £8.4 billion. In an era when health standards were generally going up, and when there was a drop in the number of people employed in manual labour which produces the industrial injuries that would be expected to lead to incapacity benefit, it beggars belief that the number of people incapacitated should increase so dramatically. All of us who studied the figures knew that incapacity benefit was simply being used as a way to get people off the unemployment register or as a form of early retirement.
Behind the statistics, the human misery was immense. I shall give one example of that, and of the Tories' failure to deal with it. In Birmingham during the early 1980s, when thousands of people were being made redundant, the Tory Government so spectacularly failed to think about the consequences of that, that the Department of Health and Social Security offices in the city all closed down for six to nine months.
Not only were highly skilled people who had engineered much of the country's wealth thrown into the dole queue with no hope of retraining, but for a long time they could not even get the social security benefits that would have kept them out of abject poverty. That is an example of the way in which the Tories failed to think in the short or the long term about the management of public services to deal with the economic mess that they had made.
Various Opposition speakers said that they supported spending on the NHS. Some areas of public spending are entirely justifiable and are investments, but the Tories' crocodile tears over the NHS are not to be believed. At the end of their period of office, in 1996–97, 137 trusts and 72 health authorities were in deficit. The trust deficit totalled £50.5 million, and the total health authority deficit was £238.2 million.
Within months of a general election, my health authority in Northamptonshire was passing a deficit budget of £2 million, with an underlying deficit of £4 million. That was financial management of the public services on the never-never. It was done purely for electoral purposes and not with a view to the sound

management of services on which many people rely for their well-being and, in the case of the NHS, for their lives.
When Labour came to power, we faced the consequences of Tory mismanagement not only of the economy, but of the finances for our public services. Sound financial management is the first pillar of good public services. I am delighted that the Government are sorting out many of the deficits that built up in the health authorities and trusts.
A further problem was the disrepair of schools, as local education authorities struggled to deal with the consequences of the erosion of education budgets. There was also the chaos of London Underground, which had been starved of investment for many years. The same applies to the national rail network, which was privatised without regard for good regulation or service development. That is why the introduction of the Strategic Rail Authority is so important for the sound management of that service.
Our record has been to ensure economic stability and the sound financial management of our public services, to provide the economic framework for financial security for our constituents and to provide the organisational and financial framework for the development of public services. Earlier today, we heard the proposals for the air traffic control service, and on other occasions we have heard the plans for London Underground. At every step, we have been opposed by the Conservatives.
I shall set out briefly what we have done. We provided independence for the Bank of England and established the Monetary Policy Committee, which has delivered the lowest interest rates for a generation. The Tories opposed that. I know that many of my hon. Friends give the Opposition the benefit of the doubt and suggest that they take a variety of views, but almost all the speeches that I have heard from the Opposition have consistently opposed the steps that we have taken.
The Tories opposed many of our measures to boost wealth creation and investment, including the dividend tax credit, which was clearly designed to ensure that money was reinvested in businesses and not just paid out in dividends.
We embarked on the new deal, an ambitious programme to combat unemployment, which would have dealt with the problems of Birmingham in the 1980s, for example. The Tories opposed that. The programme deals with unemployment not just among young people, but among single parents, people with disabilities and the older long-term unemployed.

Mr. Bercow: I am grateful to the hon. Lady for giving way. Given her admirable concern for fiscal probity, what assessment has she made of the effect of the changed rules for the use of capital receipts from the sale of council houses on the level of interest repayments on local authority debt?

Ms Keeble: I am grateful to the hon. Gentleman for raising that. I shall answer briefly, as I want to deal with other matters.
There must be careful management of public finances. Although I welcome extra money for housing, I believe that it is right for that to be phased. If a disproportionate amount of a council's budget is tied up in servicing debt


rather than running services, that does no service to the public who provide the finance. [Interruption.] The hon. Gentleman may laugh, but having dealt with such matters in real life, I understand a wee bit about it.
Single parents, people with disabilities and the older long-term unemployed were the three particular categories that the Conservative Government kept in a state of welfare dependency. I am particularly pleased that those people are being given the targeted attention that is needed to get them back into work. We are also breaking the welfare dependency culture by making work pay, specifically through the working families tax credit, which will benefit 1.3 million people. The Tories opposed that, too. I sometimes think that they used the welfare state to replace religion as the opium of the masses. They certainly failed to stimulate people to rebuild their lives and be financially independent.
Our economic measures will ensure that there is more money—£40 billion—in education and health over the next three years, but of course the Tories oppose that. In their last five years, they were happy to spend £48 billion on unemployment, but not on health, education or the measures needed to combat unemployment.
Labour has been the party of sound management of the economy and of the public sector finances. I am sure that my constituents and many other people throughout the country for generations to come will reap the benefit of the Government's prudent financial management.

Sir Richard Body: The Chief Secretary to the Treasury opened the debate with appalling complacency. He trotted out a list of favourable statistics, but surely he has been at the Treasury long enough to know that there is a considerable time lag—never less than 18 months, seldom less than two years, but often as long as three years—before a decision made in Whitehall permeates all the way down to the economy. At least three quarters of the favourable facts that he gave us are therefore attributable to what the previous Government did. None the less, he spent the rest of his time attacking Conservative Members. Attack may be the best form of defence, but he will be blown off course before long. We are just beginning to realise that some rather ugly facts are just round the corner.
Most of us have tried to put out of our minds in the past few weeks what has gone on in Yugoslavia, but we now know that the cost of reconstructing that sorry country will not be just a billion or two, but an incalculable number of billions. Mr. Ian Milne recently tried to make an approximate calculation, but all that he could say was that it would cost billion upon billion upon billion. Who will pay for that? In that country, 30 per cent. of people are out of work and vast areas of infrastructure have gone.
We all know why the situation came about, but it is now leaking out that, on 23 March, soon after the bombardment began, the Parliament in Belgrade announced counter-proposals to Rambouillet, which have now proved to be substantially the same as those which were agreed on 3 June. If that is true—it undoubtedly seems to be true—that bombardment of some 10 weeks was obviously unnecessary.
Who, then, will pay? There is a heavy moral duty upon those Governments who were responsible for that decision. The United States Government have given a

broad hint that they will now wash their hands of Yugoslavia; that they have done all that they need. The major countries of the European Union, France and Germany in particular, are in the eurozone. They cannot increase expenditure without increasing taxation. No one could possibly believe that either of those countries will be willing to increase taxation to pay for what has happened, so that leaves Britain. We shall be called upon to make a major contribution to the cost of reconstruction.
How will that be paid for? It is unrealistic to add to our tax burden. We heard from my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) some appalling figures—a £40 billion increase in taxation. My hon. Friends will repeat that over and over again as a measure of how dishonest the Government have been in pretending that there would be no increase in taxation. It is only thanks to the Library that we have been able to discover that figure. Labour Members will have to defend that £40,000 million and, in particular, the added burden that will now be placed upon virtually every business in Britain. Such businesses will not be able to pay the extra taxes and at the same time invest or pay a larger wage bill. In that respect, unless we are careful, we shall see a contraction of the economy.
The hon. Member for Northampton, North (Ms Keeble) spoke about our public services. I wonder whether she realises how serious are the prospects for the long-term future of some of our public services. If we are to increase expenditure without increasing taxation, we shall have to borrow money, and that means increasing the national debt.

Ms Margaret Moran: Does the hon. Gentleman agree that, under the previous Government, between 1990 and 1996, the public sector borrowing requirement—the national debt—doubled at a cost to the average family of about £5,500, while, at the same time, investment in education was going down and the cost to the Government of unemployment was increasing? That is hardly the golden economic legacy that the hon. Gentleman and his colleagues describe.

Sir Richard Body: Had the hon. Lady been a Member of the House at that time, she would have known that the Government had one or two critics. I repeatedly complained about the rise in the national debt under the previous Government. Rightly or wrongly, I was independent during some of that time. I am well aware of those figures. The situation was far worse when my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) was Prime Minister when the figures rocketed. I was a strong critic at that time. I was co-author of the monetarist papers which set out the pitfalls if the Government carried on on those lines. I can assure the hon. Lady that I am well aware of that history.
Over the years, a large number of economists have urged another way of making up the budget deficit. When we issue short-term gilts and Treasury bills, they are effectively IOUs, and they bear interest. When they mature, there is almost invariably a further issue for the same amount plus the interest. That is essentially why the national debt tends to rise year after year. The appalling fact is that, if we continue on that course, within about 20 years from now, the national debt will, according to the estimate of those who study the matter, have risen to £1,000 billion.
The hon. Member for Northampton, North talked about public services, as she did so eloquently earlier, I beg of her to bear in mind what the interest on that national debt will be in 20 years' time if we carry on as we are doing now. We will not then be able to talk about increasing expenditure on this, that or the other; on all the good things about which she spoke and on all the goods things that Conservative Members would like to see spending on increase. That will not happen because we will have to pay the interest on the national debt.
One does not have to be a mathematical genius to work out what the interest is likely to be in 20 years' time if that forecast is right. One has only to look at the latest Budget statement to see that we are on the upward path again. If one looks at some of the other figures, one sees that the proportion of debt-free money in circulation is in steady decline. Some 30 years ago, it was 17 per cent. and it has been dropping ever since. We now have what I might call a 3 per cent. Chancellor, because only 3 per cent. of our money stock now is directly in his hands. Next year, it will almost certainly be 2 per cent. One cannot go below 1 per cent. I beg the hon. Lady to bear in mind what will happen, almost in the lifetime of this Parliament, if we do not put on our thinking caps and consider how we will cope with the decline in debt-free money.
For some half a century on and off, a number of distinguished economists have argued that the Government have exclusive control of debt-free money. Only the Government are in charge of the Royal Mint. Only the Government can authorise the manufacture of notes or coinage. Therefore, they should be using that mechanism—MO—to pay off an increasing amount of the debt. However, if they go on, as they have done for far too long, merely reissuing those IOUs on which interest has to be paid—that may benefit the banks, some of the pension funds and some of the other institutions, but it certainly does not benefit those who are arguing for improved public services—there are bound to be severe and unjust cuts in public services. I cannot believe that any hon. Member on either side of the House would want that to happen. We should all be agreed on that, but I fear that we must change direction in this respect.
We must also recognise what so many distinguished economists have said. I do not know whether I ought to mention Milton Friedman. That name does not always appeal to Labour Members, although the Treasury has imbibed every syllable that he uttered about monetary policy, which is very good. He is one of the many distinguished economists who have argued that the Government should increase the amount of debt-free money to pay for that deficit, particularly when it is caused by an increase in capital expenditure. That is not inflationary. The issuing of gilts and bills is inflationary because they are used as a deposit by the banks to enable them to re-lend, often by a multiple of 10.
My plea to Treasury Ministers is that they should look again at those forecasts for a steady rise in the borrowing requirement. It was clear in the Budget statement that it will increase again next year and the year after, but, in the meanwhile, we may have to accept our moral duty to play a part in the reconstruction of Yugoslavia, if what I said about the Yugoslav Government proposal of 23 March is correct. In all events, I believe that the

Government will be blown off course, and when the Chancellor of the Exchequer has to speak on this subject again—next year or perhaps in years hence—he will have no cause to be complacent.

Mr. Deputy Speaker (Mr. Michael J. Martin): I call Mr. Blizzard. I am sorry; I call Mr. Rammell.

Mr: Bill Rammell: Thank you, Mr. Deputy Speaker. That is not the first time that that mistake has been made.
We heard from the hon. Member for Boston and Skegness (Sir R. Body) wishful thinking similar to that which we heard in last year's debate. Labour Members will remember that Conservative Members told us that we were heading towards a deep and damaging recession. Those fears have not been fulfilled and I am certain that the fears to which he has referred today will not be fulfilled either.
I am happy to participate in the debate and it is no exaggeration to say that the macro-economic framework that the Government have set in place and the strong public finances that they have established are the best for many years. That does not mean that we will not continue to face dilemmas, that there will not be objectives that we wish we could achieve more quickly and that there will not always be greater demands on public expenditure than we can meet at any particular time. Such stresses and strains are inherent in any developing or changing society. However, their singular achievement, in contrast to what occurred previously, is that the strong state of public finances means that our electors will have a right to expect steadily improving public services and steadily increasing expenditure on them year on year.
We have been able to achieve that because of the way in which the Government have managed the economy during their two years in power, and I make no apology for saying that. The whole of my adult life before 1 May 1997 was spent under Conservative Governments and they and supposedly well-informed media commentators constantly told us that the Tory party was the party of sound financial management and that the Labour party was emotionally, psychologically and ideologically incapable of running the economy sensibly.
Given the previous Government's record, it is puzzling that that caricature was allowed to be established: in their 18 years in power they presided over the two worst recessions since the second world war, the heart of manufacturing industries was ripped out and a huge productivity deficit was established between this country and the European Union and our American competitors. Their management of the public finances meant that, steadily and proportionately over their period in office, more and more money was spent on the cost of social failure—paying unemployment and social security bills—and less was left for education.
The way that the Government have managed the public finances in their first two years in office has put that shocking Tory record into its proper economic and political context and they have received a lot of independent support for it. [Interruption.] From a sedentary position, the hon. Member for West Dorset (Mr. Letwin) mocks what I say. He should look at what the independent commentators have said about the


Government's management of the economy. They have a very impressive record, setting in place the framework for economic stability and granting operational independence to the Bank of England, which established greater confidence for investors and the belief that decisions would be taken for sound economic reasons, not for short-term party political gain. The immediate benefit of that—longer-term interest rates—is there for all to see.
The long-term monetary framework is based on clear rules and open procedure. We took tough action at the beginning of this Parliament to deal with the fiscal deficit that we inherited and we established clear rules to borrow only to invest over the course of the economic cycle. All those changes were designed to create a climate of confidence and to generate stability and a base from which we could make progress on public services and public expenditure. It is fair to say that the results of that strategy are remarkable in terms of any historical comparison. Interest rates and mortgage rates are at a 20-year low and, although inflation is at its lowest since 1993, unemployment is still falling. Hon. Members should think back to the 1980s: the Conservative party achieved low inflation, but always at the price of extraordinarily high unemployment. Almost uniquely, the Government have brought inflation down while steadily reducing unemployment and for the first time in a generation, in what is still termed a downturn in the economic cycle, we will not have gone into a formal recession. That is no mean achievement.
In the early 1990s, a different economic strategy had an impact on the lives of ordinary people in my constituency: interest rates were 15 per cent., people had negative equity, houses were repossessed and businesses went bust every day. In contrast, our achievements have benefited the lives of real people. Crucially, they have also created the conditions for steady improvement in our public services. We have made £40 billion extra available for investment in schools and hospitals. Although that figure has been mocked, that £40 billion constitutes substantial rises above and beyond the rate of inflation for the coming three years and there will be a significant boost to public transport and other areas.
In terms of overall economic policy and attitude to the public finances, people want a Government to achieve steady, year-on-year improvements that give confidence to the consumer and to the providers of public services so that they can plan for the long term, not dramatic, unsustainable changes that cannot be sustained in the longer term.

Mr. Letwin: As a matter of genuine curiosity, how does the hon. Gentleman respond to the facts brought out by the hon. Member for Kingston and Surbiton (Mr. Davey), who said that, at the end of the Government's term in office, the proportion of gross domestic product spent on health and education will be broadly identical to that which they inherited?

Mr. Rammell: I do not accept those figures. If hon. Members consider the full five-year term, they will see an improvement. However, on all the available evidence the Government will not be in power for only five years; we will go beyond that. I am confident that we will roll forward the three-year spending review to achieve further significant increases in the key areas of public expenditure.
Against the background of macro-economic stability and sustainable increases in public spending that Labour has created, we have to judge the Conservative's party critique. I think that it wholly lacking in credibility. Conservative Members exhibit the salient features of an Opposition who have yet to come to terms with the fact that they are in opposition. Conservative Members always know which tax rises they are against. They are against the fuel escalator, despite the fact that they introduced it in the first place, and against increases in stamp duty. As they pointed out in a debate on the Finance Bill, they are even against capital gains tax. They also always know what extra spending they are in favour of. As we discovered from the comments of the right hon. Member for Wokingham (Mr. Redwood), a Conservative Government would spend more on roads. What they never do, however, is square the circle and say how they would balance the public finances.
During the passage of the Finance Bill, Conservative Members proposed amendments that would have created multi-billion pound holes in the public finances, yet they never said that they would make good those holes, apart from general unspecified cuts in social security expenditure. That is an abdication of serious politics in government.

Mr. Gibb: Was not the Labour party elected on the pledge that it could fill the hole—the extra spending on health and education—by cuts in social security spending? What we were doing on the Finance Bill Committee was opposing the tax rises, which the Labour party said, during the election campaign, they had no intention of introducing.

Mr. Rammell: The Labour party has fulfilled its election manifesto pledge to balance the Budget in a way that has sustained public confidence. That is borne out by any election that takes place—it was certainly borne out by the by-election in Eddisbury last week—and by public opinion polls. People trust the Government to manage the economy and the public finances.

Sir Richard Body: I am sure that the hon. Gentleman has read carefully the Budget statement and has seen the figures. There was a balanced budget for two years, but as I sought to explain earlier, that was the result of a time lag and of policies pursued by the previous Government. We are now embarking on a borrowing requirement, because we have a major deficit, which must be made good by issuing gilts and Treasury bills. Next year that will not be the case. That is in the Chancellor's statement.

Mr. Rammell: This Government have removed the structural fiscal deficit that we inherited from the Conservative party and created conditions that give the City and the financial markets confidence that our increased expenditure plans are sustainable. That view is held in the City and elsewhere, even if it is not held within the Conservative party. Thus far, we have substantially won that argument.
The other element of the Conservative party critique that needs to be brought into the open is the clear difference between what Conservative Members say they would do if they were re-elected to government and what the Labour Government are doing. The Conservatives say that they would abolish the national minimum wage.


Does the House remember the national minimum wage—the measure which, when it was debated during the election campaign, was to cost a million jobs? The Conservatives also say that they would abolish the working families tax credit and the new deal. Those are all measures designed to help people back to work and to make work pay.
We should not be surprised that that is the Conservative party's attitude. When it was in power in the 1980s and 1990s, it showed scant regard for the interests of people on low and middle incomes. It must be remembered that the only people who were paying less tax in 1997 than they were when the Tories came to office in 1979 were those earning more than £64,000 a year. The only reason that they were paying less tax was that everybody else was paying more. That was the reality for people at the bottom of the income scale under the previous Government: a higher tax burden; higher marginal tax rates for those coming off benefits and going into work; and other barriers that prevented people from taking up work.
With such a record, it is hardly surprising that the Conservative party opposes this Government's proposals to make work pay and to tackle poverty. The Conservative party's critique lacks credibility. It is holed below the waterline, so it is hardly surprising that it is receiving so little support. We have made an enormously positive start.
I wish to comment on two other areas. The first is an area of public expenditure where the Government have made significant progress but where we need to go further—public housing. With the release of capital receipts at the start of the Government's term in office, we produced an enormous boost for housing investment—a 33 per cent. increase over the first two years of this Parliament, and a further 50 per cent. in the three years of the comprehensive spending review. However, we must remember that we started from a low base. During the 18 years of Conservative Government, no area of public expenditure was hammered as hard as public sector housing.
Based on 1997–98 prices, in 1979 expenditure on public housing was £8.8 billion; by 1997, when the Tories left office, it was £2.1 billion. That is a 75 per cent. cut, and the cost of that cut in public expenditure can be seen by every Member of the House when we undertake our weekly constituency surgeries and hear of the ever-lengthening housing waiting list, the chronic disrepair and the human cost of such a policy. We have made a good start. I hope that, as we go beyond the comprehensive spending review, we can invest even more money in public sector housing.
The second area that I want to comment on was picked up in the Treasury Committee report on the Monetary Policy Committee. It is described as the "EMU dilemma"—the dilemma between aiming for a 2.5 per cent. inflation target and reaching an exchange rate parity with the euro to enable Britain to join the single currency. I share the Government's analysis that, if we pursue the correct economic policies in the medium term, we shall tackle that problem. However, the price for non-participation, in EMU terms, is of a higher exchange rate vis-a-vis the 11 Euroland countries. Moreover, those 11 countries are already beginning to see price reductions as a result of price transparency, a huge growth in the

eurobond market and the removal of exchange rate fluctuations, which facilitate trading between those countries. Given those advantages, which I believe will increase over time, I am pleased that, in the past few days, the Government have reiterated their policy that, if and when the criteria that we have set for entry are met, we shall recommend to the British people that they should join the single currency. That is the right policy.
The wrong policy would be that recommended by the Conservative party: whatever the circumstances and whatever the national economic interest, the people will not be allowed to decide this issue for an arbitrary period of 10 years.

Mr. Edward Davey: Does the hon. Gentleman support the idea that there must be a referendum on this issue in the next Parliament?

Mr. Rammell: I shall not give an arbitrary commitment on when the referendum should take place. The tests that the Government have set are meaningful, and if we do not meet those criteria it would be wrong to hold a referendum. As I have said to the hon. Gentleman before, given that, on any available polling evidence, those who are most hostile to the single currency are those who say that they would vote Liberal Democrat at a general election, his time might be better spent convincing his supporters of the merits of the single currency instead of constantly lecturing the Government that they are wrong on this issue.
We have put the right conditions in place, in terms of both macro-economics and public services. It used to be said that the prospect of a Labour Government would put the wind up the City and the financial markets. In the current circumstances, the only prospect that would create such a fright in the City and among investors is an opinion poll showing a narrowing of the Labour party's lead and the possibility of the Conservative party being elected at the next general election.

Mr. Crispin Blunt: I am disappointed to follow the speeches of the hon. Members for Harlow (Mr. Rammell) and for Northampton, North (Ms Keeble). Theirs were the sort of speeches that give Labour Members who entered the House in 1997 a bad name. They did not stand back and analyse the wider position, which was eloquently put by my hon. Friend the Member for Boston and Skegness (Sir R. Body). That is what I hope to do in the few minutes available to me.
If we look at the economic position in which our country is in today, we see that we are in a historically benign economic position. We do not have to deal with an inherited debt to pay for a world war. We no longer have to support the armed forces and the military posture that was required to sustain freedom and peace in Europe during the period of the cold war. We do have to deal with the historic retreat from empire that cost this country so much during the 1940s, 1950s and 1960s, and with the debt overhang that was faced by the Governments that followed.
In the 18 years of the Conservative Government, there was an enormous change in the conduct of economic policy in the United Kingdom. It was a victory of the ideas of liberal markets. That was mirrored in the victory


of the west in the cold war, and in the changes in the Labour party. It was not until 1997 that the electorate was prepared to entrust Labour with the government of the country. Its reputation for economic competence had been undermined by its previous performance in office. The Prime Minister, as Leader of the Opposition, had to undertake a three-year exercise to reassure the electorate that his party was fit for government and would not ruin the state of the economy that it would inherit.

Mr. John Cryer: The hon. Gentleman talked about economic competence. Does he recall that on Black Wednesday in 1992 a huge gap of about 20 per cent. was opened up between the Labour party and the Conservative Government, which to this day has never closed? What does that tell him about economic competence?

Mr. Blunt: I agree with the hon. Gentleman's analysis. That was a seminal event, and it destroyed public confidence in the Conservative Government. However, the picture was not as straightforward as some would like to believe. Everyone advocated going into the exchange rate mechanism when we did so in 1990—the Labour Opposition, the trade union movement, industry and the City. There was an enormous and overwhelming sea of support. Everyone thought that the right thing to do was to join the ERM, and it had some beneficial effects. It bore down heavily on inflation. The danger of inflation in our economy was eliminated in the two years that we were members of the ERM.
The then Prime Minister and Chancellor of the Exchequer staked their credibility on the United Kingdom staying in the ERM, but the markets and speculators took us out because our position was unsustainable, given the level of our economy as against those of our European partners. That destroyed public confidence in the Conservative Government. However, that does not alter the fact that the macro and micro changes to the economy in those 18 years—which have been adopted and taken forward by the present Government, who have gone even further on privatisation in some areas than I would support—show the victory of the ideas of liberal economies in an era that is economically benign.
In the time since coming out of the ERM, we have seen how much more similar our economy is to the economic cycle of the United States than it is to that of our European partners. On all the indicators, the trend of our economy since 1992 when we left the ERM is towards the United States, particularly on unemployment rates.
Another reason why the economic situation is so benign is the extraordinary motor, which the world has relied on, of this unprecedented period of growth in the United States. That is probably explained by the internet and the new technology of e-commerce, in which the United Kingdom has more involvement than any of our European partners, thus accentuating the link between us and the United States. In that context, we must examine the conduct of Government policy and how we are to deal with our public services.
If we consider the wider economic position and tie that to Government expenditure on public services, we realise that things have not really changed. When we consider how much expenditure on the health service has risen under the Government, we have to admire the

presentational coup of giving the whole figure for the Parliament in a oner, and continually repeating it so that it is lodged in the public mind as an increase in investment in health. The increase in expenditure on health in real terms is less than it was in the Parliament of 1992–97, and is almost exactly the same as the real increase in health expenditure over the 18 years of Conservative government.
The challenges that the Government must face in dealing with the health service are precisely the same as those faced by previous Governments. The Government have handicapped themselves by abolishing the internal market. They will handicap themselves further by the creation of primary care groups, and by getting rid of the advantages of fundholders and the ability of individual doctors to find the right treatment for their patients. They will have to deal with the ageing population, as we had to, and with an increasing drugs budget. Those issues make the delivery of increased health outputs, as the Chief Secretary told us—it is now all about outputs—as difficult for this Government as it was for previous Governments, with no significant change in the real increase of expenditure on health.
The position is the same for education. My colleagues from Surrey and I went to see the Under-Secretary of State at the Department for Education and Employment, the hon. Member for Norwich, South (Mr. Clarke), about what has happened to the schools' budgets in Surrey. My constituents are enormously confused. They hear the Government talk about education, education, education, and they ask the head teachers and governors of their schools why cuts are being made if the Government are giving all that money. When we analyse what has happened, we realise that the Government have given a 5.9 per cent. real increase in spending on education, but 4.8 per cent. of it has gone into teachers' pay and 1 per cent. has to be added to the pay bill because of incremental drift.

Ms Keeble: Does the hon. Gentleman accept that it is not just the total amount of money that matters, but where it is spent? We took the money spent on the assisted places scheme and put it into getting down class sizes in primary schools, which is a much more cost effective way of driving up standards and providing better education for more children. It is about where we spend the money, not just about how much we spend.

Mr. Blunt: Unlike the hon. Lady, I do not claim a monopoly of wisdom. I would far rather leave the expenditure of money in schools to the governors, parents and teachers, and let them decide the priorities for their school. That was one of the complaints made to me and other Surrey Members, and I am sure that it is echoed in discussions that other Members have with teachers' representatives. They have to make ridiculous, time-consuming, bureaucratic bids to get hold of the money that is controlled by Ministers in their pet schemes, such as the political target of reducing class sizes for five to seven-year-olds. That is the headline target that the Government set themselves, never mind the fact that class sizes for every other age group are increasing.
That situation is mirrored in the Government's handling of the health service. Clinical priorities are overturned to meet the targets for cutting waiting lists. Health and education professions are beginning to lose faith, because


the Government's rhetoric departs significantly from reality. They have built up expectations that will be impossible for them to meet, because they have to deal with the same realities in the public services that every other Government have faced.
I want to offer a way forward. My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) talked about churning taxes into social security expenditure: people pay their taxes and receive them back in benefit. That same churning of taxes is happening in health and education. People working in the health service and in education will wake up to the fact that it is the teachers, doctors and nurses who bear the burden of providing services in the public sector.
In fact, a nationally provided health service probably provides quite a good deal. Spending on health as a proportion of our gross domestic product is artificially depressed, because the Government must deal with a number of competing priorities, and do not want to increase taxation more than is necessary. In a sense, they are denying individuals a choice in regard to how much they will spend on health. Certainly we spend far less on health services than other developed countries, because our health services are in the public sector. The Government demand output from doctors and nurses, and they are the people who bear the pressure.

Mr. Leslie: Is the hon. Gentleman suggesting that we would be better off if everyone paid for their own health care?

Mr. Blunt: My point is that the duty of any Government is to underwrite access to good health and good education services. Until either my party or the party that is in government is prepared to face up to the situation and deal with the whole issue of "churning", and the public sector provision of those major services, we shall continue to engage in what is, in my view, a fairly sterile debate about whether real growth in health and education expenditure has amounted to 3 or 3.1 per cent. Once such matters are in the public sector, and are subject to all the demands of public-sector financial management—as long as the Government do not become reckless in regard to the use of public finances—we shall all be pursuing the same series of efficiency savings.

Mr. Love: It is now 8.21 pm. We have been debating economic stability and public services for nearly three hours, but I have yet to hear an Opposition Member make a single comment about economic stability. The right hon. Member for Wells (Mr. Heathcoat-Amory) refused to comment on the independence of the Bank of England two years on; perhaps the hon. Gentleman will give us his view.

Mr. Blunt: I should be delighted to do so. Let me add that I was saying that we are enjoying relatively benign economic circumstances, which is probably why there is relative economic stability. Personally, I consider it right for the Bank of England to be independent—not least under a Labour Government, because Labour does not believe that the markets can be trusted with the handling of monetary policy. It is probably as well, from the point of view of the United Kingdom and for prosperity generally, that Labour made the Bank independent.
There is a question mark over the make-up of the Monetary Policy Committee, and the rules that underlie it. Those who look at the rules relating to such matters as the three-year term will see just how independent the Bank of England really is, and will see what powers will be left to the Chancellor of the Exchequer in extremis. In general, however, I support the Bank's independence.
I believe that tackling the questions of public service in relation to health and education, and dealing with the whole business of "churning" in social security, is the only way of making a serious difference to our economic performance, if we are prepared to face up to the issues.

Ms Keeble: Will the hon. Gentleman give way?

Mr. Blunt: No. I want to make a final set of points.
Only by making a new contract with the people in regard to the provision of services that must be underwritten by the Government will we make a significant change in the rather sterile debate about the increase in expenditure, in terms of percentage points, while those services remain in the public sector.
Given the presence of the Chief Secretary, I want to say something about one more public sector service. The armed forces are now in crisis, particularly the Army. The strategic defence review, which took place last year, was underwritten by operational assumptions supposing the existence of an operational deployment pattern through which a coach and horses has now been driven. An unending deployment to Kosovo and Bosnia has shot down those assumptions. The Government must have another look at funding for the armed forces.
The Chief Secretary will recall that the budget was determined on the basis of a 3 per cent. efficiency savings target, and that the last 1 per cent. was added about a week before the announcement of the strategic defence review. Most of us regard those savings as impossible to achieve. The evidence is that the Army is now recruiting as many people as it can train at one time, and that people are still leaving. I hope that the Chief Secretary will deal kindly with the Secretary of State for Defence when he next approaches him asking for funds.

Mr. David Kidney: I want to speak briefly about three issues: the Government's achievements so far, some likely future developments, and the contribution of local government to economic stability and public services.
First, I shall deal with the Government's achievements so far. It may be a short circuit to say that I entirely agree with much of what has been said today about their achievements in regard to economic stability. I am thinking particularly of what was said by my right hon. Friend the Member for North Durham (Mr. Radice)—an excellent Chairman of the Select Committee on the Treasury, on which I serve—about the independence of the Bank of England and the contribution of the Monetary Policy Committee to our current climate of economic stability.
It could be said that the time for political argument about whether the Bank's independence is a good idea is coming to an end as reality takes over. We are seeing the results of the MPC's work. Even allowing for the time lag


to which the hon. Member for Reigate (Mr. Blunt) referred, it will soon be plain for all to see that the decision was right, and that the Bank's independence has been an unqualified success.
It is on the back of that success that the Government have been able to conduct the wide-ranging and comprehensive spending review that has taken place during the current Parliament. I am impressed by the way in which they have engaged in that zero-based budget building, with three-year—not one-year—programmes for Departments. The real gainers from the process have been health and education, which have received an extra £40 billion, but we should not forget the other gainers. I am thinking of crime reduction, transport and regeneration. Health and education between them, however, won more of the spoils than the other 19 Departments put together.
It should be borne in mind that the application of the comprehensive spending review only started in April this year. We are still in the first of the financial years that resulted from those decisions. I believe that the public will see a real difference as the years go by, and as consistent and cumulative extra spending takes effect.
Moreover, on top of the revenue spending unlocked by the review, the Government have made possible additional capital investment, even within the golden rule that permits borrowing only for investment rather than consumption. I also welcome—this is a rather different point—the separation of accounting for capital spending from accounting for revenue spending, which adds to the discipline involved in ensuring that capital investment goes ahead even when times are hard.
As a result of the comprehensive spending review, there are more modern hospitals, clinics and general practices. I invite hon. Members to come to my constituency, and see the new building that is taking place at Staffordshire general hospital. The review means more beds for the accident and emergency unit, more doctors and nurses—better paid—the treatment of more patients, shorter waiting lists, and more emphasis on primary care, public health and the reduction of health inequalities.

Mr. Blunt: On that point, a new hospital in my constituency, East Surrey hospital, was opened about 10 years ago by the then Prime Minister, but efforts to secure efficiencies and new buildings go on throughout the health service. In the next door constituency to mine, that of the hon. Member for Crawley (Laura Moffatt), a Labour nurse—she was advertised as such in Labour party political broadcasts—the accident and emergency department is being closed and moved to East Surrey hospital in an effort to make the efficiency savings that have to be found in the health service. The search for those savings will go on and result in new buildings opening and old buildings closing. It happened under previous Governments and it will happen under the present Government—nothing is new.

Mr. Kidney: I hope that the hon. Gentleman is saying that he approves of the efficient use of public resources, including money that is spent on our health service. I applaud the fact that we get best value for the money that we invest in health, as in any other sector of spending.
That can be said of education, where extra money from the comprehensive spending review means more new schools. Again, the hon. Member for Reigate can come to

Stafford to see the new Sir Graham Balfour high school that is about to be built under a PFI scheme, or the almost completely new buildings of the Cooper Perry primary school—part of the same PH scheme. There are more repairs, renovations and extensions.
As I visit the schools of my Stafford constituency, I am pleased to see the new windows, new energy-efficiency measures, new security measures and the indoor toilets that have appeared in some schools. School staff talk about new extensions to their schools. I am impressed by the number who have seen schemes to improve the building that they occupy. There is more money for books and equipment. I accept that Stafford local education authority is a pilot for the national grid for learning, but it has made a reality of the grid, with all schools either connected, or about to be connected, to the internet, and it means more money for teachers pay.
On future development, the first thing that I hope to see—it is not in the Government's gift—is the Tories complete their U-turn on Bank of England independence. All-party agreement on that would add to the credibility of monetary policy. I would next look forward to the locking-in of the benefits of the Chancellor's fiscal action to date, the elimination of the current account deficit, and the reduction in Government debt to about 40 per cent. of gross domestic product or lower, leaving the country well placed to take advantage of changes and opportunities in future.
Those include the ever increasing opportunities from the continuing information technology revolution. We will be well placed to withstand external shocks—such as the one last autumn when Russia defaulted on its debt, and a number of south-east Asian economies collapsed—and the continuing doldrums of the Japanese economy. Those were serious shocks. Thanks to the economic stability that we have achieved in this country, we have survived all those shocks without a recession.
I would like the new public service agreements to be used as a tool to ensure that we get value for money from public spending. The public service agreements, the new accounting standards that have been set following the 1995 European standards, which we adopted last September, and the new rules for resource accounting and budgeting that will be introduced in the next few years, will mean considerable opportunity not only for the country to manage its finances more carefully, but for Parliament to have greater scrutiny over the Executive's spending plans. I echo the point that was made by the hon. Member for Kingston and Surbiton (Mr. Davey).
I move to the future of PFI. The Chief Secretary mentioned that £4 billion of spending had already been achieved through PH schemes. That will, no doubt, continue. This week, the result of the second Bates review of the PH has been announced, with a recommendation that a new partnership UK ensures that we get value for money and monitor the future development of PH. Next year, the next round of the comprehensive spending review will take place. I hope that that sees a continuation of three-year budgeting and three more years, as promised, of real increases in public service spending—real increases year after year.
I ask the House to have regard to two offshoots over coming years. The last Budget promised a review of the inter-generational effects of decisions that we make in our lifetimes and in our time in Parliament on public spending


and public borrowing. What debt are we leaving to the generations to come and what assets are they getting for their money? The other offshoot is the distributional effect of our decisions. Who are the winners and losers when interest rates fall, or rise? Who are the winners and losers of a decision to increase, or to reduce direct taxes? Who are the winners and losers if we increase or reduce indirect taxation?
Thirdly, I look at the contribution of local government. Never let it be forgotten that it is a major contributor to public expenditure—more than £50 billion this year, three quarters of which comes from central Government, either in grant or in the distribution of business rates. Local government is a main deliverer of public services.
Some national issues have very important repercussions on local government. Establishment of the national assets register, requirements for asset sales and rules on private finance initiative schemes, for example, impinge on the role of local government. I call on the House to ensure that, in all those schemes, there is sufficient accountability in the decisions made by local government. Nationally, there should be sufficient access to figures on the schemes, and to information on the figures consequences on the national accounts—and, therefore, on national economic stability.
As the hon. Member for Kingston and Surbiton said, when departmental decisions on public service agreements have an impact on the performance expected of local government, it seems perfectly reasonable to allow local government to have some say in how the agreements content is decided.
Some aspects of national accounting—such as the definition of public spending—have particular importance for local government. Local government is sometimes—in borrowing, for example—very much bound by central Government's control over its spending decisions. At other times, however, those rules can be relaxed, bent or changed. At one time, for example, some local councils had a stake in regional airports and were allowed to borrow extra money that did not count as public borrowing. Another specific example is that of local authorities that still have council housing stock and want more freedom to borrow money, perhaps through local housing companies. The definition of public spending is, therefore, a very important issue for local government.
A growing issue is the earmarking of specific tax income. Hypothecation is currently a very live issue for local government, which is having lively debates on matters such as congestion charging and whether revenue from such charging might be used in implementing local transport policies. Another related issue is how fine income gained by using speed cameras might be used—an issue that I have previously championed in the House.
I should like to make one final point on local government spending. As I said, much of the money spent by local government is provided as grant from central Government, and central Government distribute that money according to standard spending assessments. For some local authorities in the south-east of Britain, SSAs include an area cost adjustment element, which is meant to deal with the assumption that, in the south-east, the costs of employing people are higher. I believe that that

assumption could easily be refuted by various figures, such as those produced every month by the Reward Group.
All things being equal, a higher SSA leads to a higher level of central Government grant, thereby clearly affecting most services that local government provides to the public. A majority of local authorities, such as Staffordshire county council, lose out because of the area cost adjustment. Figures from the Library—an august and independent body—show that, for the current financial year, Staffordshire county council could have received another £28.6 million in Government grant if it had received the arithmetical mean of the area cost adjustment received by some local authorities.

Mr. Edward Davey: Does the hon. Gentleman agree that some borough councils in the south-east of England—indeed, in London—lose out from the current area cost adjustment system? One of the most authoritative analyses of reforming the ACA explains that reform would make it possible to provide some councils, such as my own council of Kingston, with significant grant increases. The analysis specifically stated that ACA reform would enable £2 million extra to be provided to Kingston council. Does the hon. Gentleman therefore accept that changes to the ACA would not only create both gainers and losers, but that the gainers and losers would be in various parts of the country?

Mr. Kidney: I currently have in my sights those who benefit from the area cost adjustment. I shall, in a moment, make some suggestions on how the ACA might be improved—although some of those suggestions might not be attractive to the hon. Member for Reigate, who did not seem to favour bidding, which I shall deal with later in my speech.
Most people realise that, in one way or another, the system of distributing central grant to local government is flawed. I think that there would have been a change in the system were it not for the fact—which was just emphasised by the hon. Member for Kingston and Surbiton—that there are so many possible ways of changing the system that the Government have found it difficult to separate a clear leader from the pack of possibilities. That is why a lengthy and detailed review is currently taking place. In answer to a written question recently, the Government said that they expected to consult publicly about possible choices early next year.
One improvement would be to build on the success of systems that recognise extra need or innovation, such as the modernisation fund for capital spending and the standards fund for education spending, and reduce the variations in the basic distribution of grant between local authorities. A more radical suggestion that could be considered on another occasion would be to allow local government to raise more of its income and become less dependent on central Government grants.
In summary, I should like to see fair funding and fair treatment for local government. That would lead to a renaissance of local enterprise. If local government was not exactly at the centre of it, it would at least be a major player. I believe that central Government deserve a bouquet for the work that they have done so far in managing the country's economy, putting the national finances in order and increasing transparency and public


accountability. Over the years, the public will benefit increasingly from the Government's stewardship of the economy. It is no wonder that even the Opposition are resigned to seeing Labour in government for years to come.

Mr. Nick Gibb: I certainly do not agree that the Government deserve a bouquet. However, there is a pattern to their approach to public spending and taxation involving deception, breach of promise and obfuscation.
Before the election, Labour had a problem: people did not trust Labour on tax or believe in its ability to keep public spending under control and maintain stable public finances. At the same time, Labour was making huge political capital from claiming that there was insufficient spending on the health service and education. So Labour, and the leader of the Labour party in particular, made a commitment not to raise taxes at all. There are numerous quotes from the Prime Minister and other Labour Members, including the Chancellor of the Exchequer, to the effect that Labour's spending plans involved no increases in taxation. They said that all their plans for extra spending could be funded from savings in the £100 billion a year social security budget. There are a number of quotes from the Prime Minister who said in July 1994:
A large social security budget is not a sign of socialist success but a necessary consequence of economic failure.
In October 1996 he said:
Our priorities should be to re-order public spending so that we are spending less on welfare and more on areas like education.
He made the pledge, commitment or vow to which my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) referred.
Far from cutting social security spending, it has risen by some £38.2 billion over the three years of the spending review—about as much as the increases in health and education put together. Because of that failure, the Government have been raising huge amounts of extra taxation. They have imposed tax increases by stealth.
One of the many great legacies of Margaret Thatcher's period in government is that no Government since 1979 have been able to increase the basic rate—or any rate—of income tax; so all tax increases have been through back-door methods, by stealth. The present Government are the masters of that.
The Conservative party has pledged low and honest taxation, so we will help people by revealing how much tax is being raised by other methods—from taxes on petrol, whisky and food—so that people in a mature democracy can make a conscious and informed decision about the level of taxation that they want to pay and the level of spending that goes with it.

Mr. Love: The hon. Gentleman talks about low and honest taxation. Perhaps he can tell us about low and honest public expenditure and say where the Conservatives would make savings to create that low taxation.

Mr. Gibb: I shall come to that point in a moment. The Conservative Government got social security spending

under control. The Labour Government were elected on the platform that they would cut social security spending and use the savings to fund their health and education plans. In the Standing Committee considering the Finance Bill we opposed the tax rises because the Labour party made a pledge—a commitment to the British public—that it had no plans to raise taxes at all. Yet we have had a plethora of stealth taxes raised by the Government since they came to power.
There has been the £5 billion-a-year pensions fund tax from the ending of the repayment of dividend tax credits. The quarterly corporation tax payments will raise between £2 billion and £3 billion a year from business over the next four years. The fuel escalator has been increased to 6 per cent., and there have been two increases in one year. Now, £8.50 of every £10 spent on petrol goes in tax. There have been huge stamp duty increases, the abolition of MIRAS, the abolition of relief for home income plans and the abolition of the married couples allowance, even for those who turn 65 after next April. There have been increases in the landfill tax and in insurance premium tax. All of this amounts to some £40.7 billion of extra taxation over this Parliament—this from a Government who said that they had no plans to raise taxes at all.
When Labour Members are challenged, they respond by claiming that, during the election, they did not say that they would not raise taxes at all, but that they had no plans to raise income tax. However, Labour gave the impression that the promise extended to taxation as a whole, since all their attacks on the Conservatives were about "22 Tory tax rises". None of those 22 tax rises was an income tax rise—they were all non-income tax rises.
The reality was that the Government's promise extended only to income tax—but they have not even fulfilled that promise. The abolition of MIRAS and the married couples allowance means that people will pay more income tax. A married couple will pay £200 more income tax a year as a result of the Government. A newly retired couple will pay £500 more income tax than they had expected. Now, the Government's promise is diluted further—they promise only not to raise income tax rates. It all sounds like an unscrupulous salesman selling a defective product and referring to the small print of the contract.
The spinning that Labour is so good at has been applied to the public accounts. The Government claim that, despite raising an extra £40.7 billion in taxation, the burden of tax is falling. That is a huge sum of money, and it is simply not credible to say that the Government can raise that sum and not raise the burden of tax. The way in which this is presented in the Red Book is disgraceful. A series of deceptive presentations and absurd assumptions have been allowed to be put into the Red Book, such that it is almost becoming a meaningless document unless it is translated by the Library or by specialists.
The working families tax credit—the replacement for family credit—is now, to a large extent, accounted for as a reduction in tax, rather than as public expenditure. That has the effect of reducing the key figure in the Red Book—on net taxes and social security spending; the figure that people always turn to to assess whether the tax burden has risen. The remaining element of the working families tax credit—which is accounted for as spending—is not included in the social security line, but is further down the table in "Accounting and other adjustments."


When commentators come to judge the Government's record on social security spending, they will see an artificially reduced figure.
The Government now accept that there have been increases in social security spending, which means that they have abandoned their claim to be decreasing it. They say that it is increasing by 2 per cent. a year in real terms. However, if one adds back the £5 billion a year of working families tax credit, the increase amounts to 3.2 per cent. from 1998–99 onwards. That figure comes from the House of Commons Library.
By contrast, the same Library produces figures for the Conservative years—including the two years of Conservative spending plans adopted by the Labour Government—up to the time of the working families tax credit, which show that social security spending fell by 0.2 per cent. a year from 1995–96 to 1998–99. As a consequence of the Government's plans, social security spending will rise to £118.5 billion by 2001–02.
Another hugely deceptive device used by the Government in the Red Book is the table on pages 112 and 113, headed "Budget Measures". This used to be used to provide a summary of the effect of the tax changes in the Budget. One could then look at the total at the bottom to see the overall effect. The Government have included in the list several items of public expenditure and classified those items of expenditure as a tax cut. Nowhere else in the public accounts are those items listed as tax cuts. For example, item 22, entitled "Sure Start Maternity Grant", a £20 million expenditure plan, is included as a £20 million tax cut. The £100 winter allowance is a £640 million public expenditure plan but it is listed as a £640 million tax cut. That makes the whole Red Book completely meaningless.
The Government have used many sleights of hand in presenting the public finances. We have already heard about current versus capital expenditure. One wonders whether such a distinction can be of any use, because little of Government capital spending generates any income and because of the difficulty of assessing what is investment: is teachers' pay an investment for the future or revenue expenditure?
The Government have ruthlessly talked of the surplus on the current budget, giving the impression that they are running a budget surplus, when in fact they are running a deficit. For example, the Red Book lists a so-called surplus on the current budget of £2 billion, £4 billion, £8 billion, £9 billion and £11 billion in the years from 1999 to 2004, but the same table—B5 on page 151—shows an overall deficit of £3 billion, £3 billion, £1 billion, £3 billion and £4 billion in those years.
In any interview or article, the Government trot out the current budget figures—total revenue less current spending—in a deliberate effort to mislead and obfuscate. The classic example is how the Government spun the lower growth forecast in the March 1999 Budget. The June 1998 comprehensive spending review report mentioned a current surplus of £7 billion, £10 billion and £13 billion, adding up to £30 billion over three years, despite the fact that there was a deficit in those three years.
The Chancellor spoke of a £30 billion current surplus, but the growth forecast was revised downwards in December 1998, and in the March 1999 Budget we saw

the effect of the lower growth figures on the public finances. Lo and behold, instead of the £30 billion current surplus being reduced, as one would expect, it is now talked of as a £34 billion current surplus. How can that be? The Red Book shows a current surplus of £2 billion, £4 billion and £8 billion, which adds up to only £14 billion, but if one adds in the next two years, with a surplus of £9 billion and £11 billion, the total comes to £34 billion. The Government are now including five years instead of three, which is totally deceptive—why not six or 10 years?—and undermines the Chancellor's credibility.
I have been trying to get to grips with what is going on. I tried to clarify the effect of all the Government's tax measures by tabling a written question using almost the same words as the now Home Secretary did in 1981 when he was a humble Back Bencher. I asked how much tax, including income tax, national insurance, VAT and council tax, was paid by different types of typical households such as single people or married couples in different income groups.
That question was answered fully and honestly every year under the previous Government, but the current Government said:
Estimating the impact of indirect taxes is imprecise as spending patterns vary widely between households with the same composition and income."—[Official Report, 16 April 1999; Vol. 329, c. 388.]
The problem was ever thus, but the Conservative Government made reasonable and sensible assumptions and gave the figures.
When I asked for the figures on the basis of such assumptions, I received the same brush-off. When I asked for a list of the assumptions used to answer the question since 1981, I was told that they were part of advice given by civil servants to the previous Government that was not available to the public. That is absolute nonsense. I asked for a list of facts, and it is disgraceful that those facts have not been forthcoming.
Clearly, the Government are frightened to reveal the figures. For all their protestations about freedom of information, the Government know that including their stealth taxes—most of which are indirect—in figures for the tax burden will show that that burden has increased hugely.
The Government have raised taxes by £40 billion despite promising not to raise them at all. They are trying to hide those increases and how they are reported in the Red Book. The Government have lost control of social security spending, and are trying to hide that fact, too, in the Red Book.
The Government are famous for spin, and they are spinning the presentation of the public finances. I do not believe that that is acceptable behaviour for the Government of this country.

Mr. John Cryer: I wish to return to matters concerning central banks, first raised in this debate by my right hon. Friend the Chief Secretary to the Treasury, who dealt with them at length.
The European central bank represents, in its most refined and powerful form, a feature central to the neo-liberal economic catechism—the independence of central banks. Two reasons are usually adduced to support


that independence. The first is that, given that the matters involved are technical and concern the long term, it is much better to take them out of the hands of politicians—who think only in the short term—and hand them over to clever technocrats who understand them. The second is that the long-term economic benefits that can be achieved by economists are a fair price to pay for the loss of democratic control.
The arguments put forward in support of the first-political—reason for central bank independence can be advanced for other areas of Government policy. For example, health and social policies are notoriously complicated. Long-term decisions and considerations are involved, so why should they not be handed over to technocrats?
The same could have been said in 1939. When Chamberlain declared war on Nazi Germany, it could have been argued—in fact, it was argued—that the conflict had arisen through public pressure stemming in part from what happened in the Spanish civil war. According to that argument, foreign policy decisions should have been handed over to technocrats who had the country's long-term interests at heart, and taken away from politicians and their short-term considerations.
The evidence for the second argument—that independent central banks deliver long-term economic benefits to their economies—is patchy, at best. Even in connection with fighting inflation, the evidence is extremely thin, and the evidence for independent central banks meeting with success in fighting inflation in developing countries is non-existent. Their record is, if anything, worse than that of developing country central banks under Government control.
However, the first argument that I described—that power should be handed over to bankers and taken away from politicians—is the more important. More and more people around the planet are increasingly suspicious of globalisation and regard that process as a menace. Yet globalisation has been a key factor in persuading many Governments to give up control over monetary policy and hand it over to central banks.
Obviously, powerful financial and business elites have a much greater interest in conservative monetary policy and in price stability than workers and trade unions. Many trade unions in this country have secured conference decisions against the single currency and against the creation of the European central bank.
That is the background that enables us to see the European central bank for what it is. It is an attempt by the western European business and economic elite—and to some extent by the political elite as well—to take decisions away from ordinary voters, and hand over increasingly concentrated power to the business and financial elite.
The ability of people in the street to get hold of those who make economic decisions that affect everyone's future, to hold them to account and, if necessary, to turf them out at the next election is being removed. Democratic rights and controls are being handed over to people such as Mr. Duisenberg in his office in Frankfurt. That is extremely dangerous.
In fact, the transfer of power to the ECB is even less democratically accountable than that to the MPC and the Bank of England, where proceedings are reported and where decisions and the reasons for them are clear. In a

recent interview, Mr. Duisenberg said that he would not explain which ECB members voted for what because it might subject them to political pressure at home. Such pressure is part of the process of democratic accountability. People should be able to argue their corners and explain why they have come to decisions, but, crucially, members of the ECB do not face election.
By the same token, public services should remain publicly accountable and publicly owned. I have lived in London for 17 years and I have seen a sometimes gradual, often rapid, disintegration in the quality of London Underground. Under the previous Government, there was a concerted attempt to destroy the tube. In his final Budget, the right hon. and learned Member for Rushcliffe (Mr. Clarke) announced cuts of £300 million that would have happened over two years if the Conservatives had won the 1997 election.
In November 1993, I lived in Ladbroke Grove and worked in King's Cross for Tribune, a weekly newspaper known and loved by many of my hon. Friends on the Front Bench. One day, the tube system virtually collapsed, and I walked from west London to north London. That collapse was not a result of industrial action, or of bombs planted by the IRA. A piece of cabling on the eastern section of the network, which had been due for renewal for years, had broken, bringing the system to a halt. That happened two days after the then Environment Secretary published, with no hint of irony, a consultation document titled "London: Making the best better".
At least the present Government are trying, through the public-private partnership, to get investment into the tube. However, the process is fraught with difficulties. I have increasing reservations about the possibility of success under the PPP. My right hon. Friend the Deputy Prime Minister has told us that the Government are in exclusive talks with Railtrack on the sub-surface, shallower lines. Why are we talking to a company that has such an appalling investment record? Hon. Members who have read the report of the Select Committee on the Environment, Transport and Regional Affairs will have seen Railtrack's vaunted claim to be investing £27 billion over 10 years. However, when the figures are broken down, new investment is actually £1.5 billion over 10 years. That is pathetic, but Railtrack is trying to get its clutches on the sub-surface lines.
There are also difficulties over the return that the private sector will want on investment. The Select Committee considered that 20 to 25 per cent. over 15 years would be reasonable, and would mean about £1.5 billion on the investment made, but why not directly invest public money in the tube—borrowed, if need be, at a cheaper rate than a private sector company would receive—to build the system that people want?
The fire service is also under pretty concerted attack. The London fire and civil defence authority is getting rid of one of the two fire engines in my local fire station, for example. There is no financial argument for doing so, and the LFCDA seems to have no decent reason for its action, but the authority is ploughing ahead in the teeth of local opposition amounting to thousands of people.
Nationally, meanwhile, the agreement that firefighters struggled for in the national strike of 1977 is under threat. The employers are determined to get rid of the national agreement, which safeguards firefighters' pay and conditions. Having heard the employers' side, I have no


doubt that they are looking for a fight with the Fire Brigades Union. That is outrageous and disgraceful. The employers are threatening the terms and conditions of men and women who risk their lives day in and day out, week in and week out, on our behalf. I should like Labour Members to make it clear to the employers' side that we are not going to put up with this; I am sure that we all will. The employers should treat the union decently, get back round the table and stop trying to break the national agreement.

Mr. David Ruffley: A precondition of economic stability is sound monetary policy, which was the subject of a report published yesterday by the Treasury Select Committee, on which I sit. I do not share the optimistic gloss put on its recommendations by the right hon. Member for North Durham (Mr. Radice). I shall therefore direct my remarks to three points relating to the operation of the monetary policy framework.
First, it is too early to say whether the existing arrangements are successful. Secondly, I want to draw attention to the structural defects in the framework set out in the Bank of England Act 1998, particularly the shortcomings in making the Monetary Policy Committee accountable. Thirdly, I want to discuss the role that the level of sterling is playing in the deliberations of the MPC.
In considering why it is too early to make a definitive or sensible judgment on the performance of the MPC, it is important to remember the muted inflationary environment over the past two years. That relates partly to the weakness in world commodity prices, partly to the strength of sterling, and partly to the Asian crisis. But we should not kid ourselves that the MPC has been tested seriously. Lord Burns, the former permanent secretary to the Treasury, has rightly noted that only when there is a serious inflationary shock—a serious upsurge in the world prices—will the House and the country be able to determine whether the MPC is up to the job. It is worth emphasising that the Deputy Governor of the Bank of England, Mervyn King, has said:
the environment in which we have been working is one that has made it easier to bring inflation down and keep it close to target.
The primary test of how well the MPC is doing—how far it is able to hit the 2.5 per cent. target—is thus not something that we can judge. I am not impressed by the boastfulness with which the Chancellor talks about the target being hit within 0.7 percentage points over the two-year period, because in their paper on the mechanism of transmission, the MPC and the Bank have said that there is a lag of at least two years. That is why we cannot make sensible judgments about inflation outturns. We can only consider forward inflationary expectations.
Hon. Members have already observed that there has been a dip since the introduction of the MPC in real and nominal gilt yields, and that long-term interest rates are very low, the lowest for decades. However, that is not to say that we have entrenched a permanently low inflationary culture in this country. All we can say is that a certain initial credibility has attached to the MPC. Definitive judgments cannot yet be made.
It is too early not only to say whether the MPC has succeeded in achieving its primary objective, as set out in the Bank of England Act 1998, but to make any sensible judgment about whether it has achieved its secondary objective, which is defined in the Act as supporting economic policy, including objectives for growth and employment. The Treasury gloss on that, put forward by the Chancellor, is that the MPC should aim to achieve high, stable levels of growth and employment.
I suggest that we cannot take seriously Labour Members' views that not only have we achieved low inflation in the new monetary policy framework, but we have done so with unemployment in this country lower than in other low-inflation countries on the continent. Surely, and regrettably, we must expect unemployment to rise. We have yet to see the full effects of the social chapter on the British labour market. We have yet to see the full effects of the fairness at work proposals in the Employment Relations Bill, which has been through its final stages in the House this week. Unemployment will go up. What will the Monetary Policy Committee do then; and how will it interpret its secondary objective, as defined in the 1998 Act?
The best way to illustrate my first point about whether it is too early to tell if the MPC has been successful is to consider the reaction to the increase in base rates of 25 basis points in June 1998. At the time, commentators observed, as they still do, that it was a mistake. The distinguished economist Roger Bootle observed that the decision may in itself have contributed to a lack of confidence the following autumn. The TUC observed that the evidence simply did not support an increase at that time. William Keegan, the distinguished economic commentator, observed at the time that the MPC did not pay proper attention to business surveys; indeed, it ignored them. That is why the Treasury Committee observed:
It is too early to be sure that the interest rate increase of June 1998 was not a potentially serious mistake.
My second main point is that we should ask ourselves whether the new monetary policy framework is accountable to this place and to the country at large. It is not enough for an independent monetary policy merely to hit an inflation target of 2.5 per cent. or anything else. Surely it is important for the process to have democratic legitimacy. The current system lacks such legitimacy. There is a democratic deficit.
In opposing that view, proponents of the MPC, who think that it cannot be improved at all, point out that minutes are now produced two weeks after meetings—formerly they were produced six weeks afterwards—that voting records are disclosed in those minutes, and that there can be a public debate about the contents of the minutes. That does not amount to much accountability, and it is not enough by a long chalk.
The Governor and members of the MPC said in their evidence that they are very responsive to demands for information about their activities. The Governor made the curious observation that he makes many speeches and talks to the business community a great deal. Members of the committee said that they would make sure that the Bank's regional agents got out more. Mervyn King suggested that he would conduct public opinion polls through the Bank to find out what the public thought about what was going on. That is pretty thin fare.
The Treasury Select Committee has at least made a start by agreeing to a recommendation to toughen up the accountability that is so sadly lacking in the current arrangements.
One suggestion is that the MPC hold its monthly meetings outside Threadneedle street and away from London, in towns and cities the length and breadth of the country. One hopes that it would at least make a splash in the local newspaper and with the local business community. I am making an early bid for one such meeting to be held in the town of Bury St. Edmunds. I do not see why the Monetary Policy Committee should not be exposed to what life is like in the real economy—not only in big regional centres, but in market towns and rural areas. I shall write to the Governor of the Bank of England, extending that invitation to him. It is important to emphasise that point, because the Select Committee, with cross-party agreement, remarked that it was
surprising that no presentation of the differential effects of monetary policy on sectors of the economy and on regions has been made by the Bank since the MPC was formed.
That is a lamentable omission.
There are other ways in which we can ensure that the MPC is more accountable. In particular, we can ensure that not only the voting record but the views of each member of the MPC are disclosed. It might be argued that if members of the committee think that all their views will be recorded and attributed to them, they will be inhibited from free decision making, but that is not a convincing argument. We look forward to the recording of individual views, so that we may judge over a period the performance of individual members of the committee, and decide whether they are good at, or bad at, their job.
Most important, we need to ensure that the confirmatory hearings, which all members of the Committee believe are a good idea, are placed on a statutory basis. Few of us were convinced by the Chancellor's view on the subject. He said that the very fact that nominees had to come before the Select Connnittee ensured that they did their homework, and that they were prepared to answer difficult questions. We need more than that. The Select Committee must have teeth—the power to veto nominees with which it is not happy. In that connection, the Select Cornmittee would be standing in the shoes of Parliament as a whole in ensuring that there was some democratic accountability on the part of the MPC and its members.

Mr. Kidney: Before the hon. Gentleman leaves the point about confirmatory hearings, can he confirm what he said about the veto? That is certainly not part of the practice of the Treasury Select Committee, or of the recommendation that it made, during the passage of the Bill that became the Bank of England Act 1998, about the procedure for confirmatory hearings.

Mr. Ruffley: I see it as a natural future extension of the request from the Select Committee this week that the confirmatory hearings be placed on a statutory basis.
My third and final point concerns the high level of sterling. We know that there is an implicit dilemma in achieving convergence on interest rates and inflation rates in preparation for joining the euro, in achieving an inflation objective of 2.5 per cent., and in getting sterling down so that it is at a level ready for entry to the

eurozone. I did not find the answers that we received from the Chancellor about whether that was a future possibility convincing. He talked about his current intention. He did not rule out the—probably covert—pursuit of an exchange rate policy while aiming to achieve an inflation objective. We shall wait with interest to see how the Government get sterling down—as they will have to if they seek entry to the European single currency.
Finally, the shadow Chancellor announced this week that he would institute a commission to look at all the issues of which I speak—the absence of accountability, and the fact that we do not know whether the MPC has performed properly or not. Given that the Labour party did not tell us two days before the election about its position on an independent monetary policy, it is entirely right and proper that, two years before the next general election, we have a considered—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order.

Mr. Christopher Leslie: Thank you, Mr. Deputy Speaker, for calling me this evening.
The hon. Member for Bury St. Edmunds (Mr. Ruffley) has been very brave this evening. He is one of the few hon. Members on the Opposition Benches who voluntarily raised the issue of Bank of England independence, and the wonderful independent commission that the shadow Chancellor has set up—under his own stewardship. The shadow Chancellor is to chair his own commission that will consider whether the Conservatives should do a U-turn on their policy on Bank of England independence. How ignominious, how humiliating for them!
In the wide-ranging debate tonight on economic stability and public services, the Conservatives had a great opportunity to oppose the Government and to show the world and the voters what their alternative would be and what their policies are. They have failed abysmally. Why? Because the Government are so successful with their economic policies, with the way in which the economy has been performing, and with the public expenditure plans that we have put in place, which leave so little to be criticised.
Most of the attacks on the Government have focused on welfare, on various statistical anomalies that the Opposition like to talk about, on whether ISAs have been sufficiently successful, and of course on the perennial subject of Europe. The Conservatives were so desperate for hon. Members to help them out that even those on the Front Bench had to intervene on each other—an unprecedented parliamentary occasion. The Clerks looked extremely perplexed at that interesting innovation. The public outside will have to realise that that was a symptom of a failure to attack a Government who have been performing so well.
Let us look at the state of the economy. Consumer spending is picking up well—2.5 per cent. in July. The growth in gross domestic product is coming into line with the Treasury prediction, coming in at 0.9 per cent. in July. Unemployment, simultaneously with low inflation, has come down from 1.58 million in January to 1.4 million in July.
Headline inflation is now very low—1.2 per cent. in July—which helps pensioners and savers in particular by stopping savings being eroded and ensures that people are


rewarded for thrift and cautious planning for their future. I know that my constituents are extremely grateful to the Government for their policies, which have put in place such low inflation levels.
That is the true characteristic of a one-nation party, because inflation at its present low level helps everyone. People can plan for the future with the certain knowledge that their savings and money will not be eaten away by other external factors. Our record on inflation is highly commendable. Over the summer months, we should continue to repeat how that contrasts with the Conservative record of prolonged double-digit inflation during the 1980s.
Interest rates are extremely low, and mortgage rates are at their lowest for a generation. Home owners across the country and especially in Shipley are pleased that they have been able to plan for the future and borrow at an affordable rate.
Even manufacturing output is edging upwards. Things are looking up for the economy. We have managed to steer ourselves through difficult international times by maintaining a careful course of stability, and by focusing on getting monetary policy and fiscal policy to work together in such a clever relationship.
The monetary policy framework that we have put in place and the independence of the Bank of England have been a success. I should be interested to hear from the hon. Member for West Dorset (Mr. Letwin) his party's policy on the Bank of England's independence. I know that there are many different views, but does he agree with, for example, the shadow Chancellor who, only nine months ago, said, "We would not have given up control of interest rates in the first place", or with the right hon. Member for Wokingham (Mr. Redwood), then the shadow Secretary of State for Trade and Industry, now the shadow Minister for Transport, who called it a wrong idea and a big mistake?
Many Conservative Front-Bench spokesmen castigated the Government's policies, saying how dreadful and horrible it was that we were creating greater objectivity in monetary policy. Now, when they see the success that the policy has engendered, the only criticism that they have is exemplified by the empty Benches opposite. This is a sad and embarrassing day for them. It is degrading for the Front-Bench spokesmen. We shall watch their U-turn with great pleasure and relish during the summer months.
I shall be interested to know what will happen to the Conservative party's fiscal policy during the summer months. It has made many spending commitments. Just tonight we have heard talk of the Territorial Army, and the hon. Member for Reigate (Mr. Blunt) pleaded for more money for defence. Earlier in the day, the shadow Home Secretary asked for tax relief for donations to political parties. Apparently, the odd couple of dozen million pounds does not matter too much.
Earlier in the week, we heard the Conservatives' policy on London Underground. Instead of investing in London Underground, they want to privatise it and use the proceeds to pay for however many dozen new road schemes the right hon. Member for Wokingham recently put in his new transport policy document. London Members in particular will be curious to know whether

the Conservatives intend that any proceeds from the privatisation of London Underground should be ring-fenced for reinvestment in London, or whether it is now Conservative policy to spend that money in the rest of the country. I suspect that Lord Archer, in his campaign to become London mayor, will find that a difficult circle to square.
A Conservative Front-Bench spokesman has committed himself to an extra £227 million for the police budget. Even the Scunthorpe Evening Telegraph makes it clear that the Conservatives have committed themselves to massive extra expenditure. In March, its headline was "Hague's promise of free travel" for sixth form students. Their spending commitments are being piled on top of each other.
The problem is that such commitments simultaneously undermine the Exchequer revenue. The Conservatives commit themselves to more and more expenditure, but at the same time undermine what is available for the public sector. As the Chief Secretary said earlier, on the past few Finance Bills the Conservatives opposed any changes to advance corporation tax, and they wanted to stop the changes to gambling duties. They argued in favour of retaining the foreign earnings deduction loophole. It is not clear whether that was for the benefit of Michael Ashcroft or others. A great policy is emerging to halve the rate of bingo duty. That should be at the forefront of their manifesto. They oppose the fuel and tobacco duty escalator and stamp duty. They may be only minor amounts, but they add up to a lot of lost revenue—£11 billion in this financial year. Such amounts are significant shortfalls. That money should and could be spent, and is being spent by the Government, on health and education. The Conservatives could not deliver that, particularly with all the other spending pledges that they have made.
The Conservatives have a lot to answer for and, during the coming months and years in advance of the general election, the public will be less and less convinced by the Conservatives' abysmal failure to attack the Government. The risk that they pose, and the threat that the British people would face should they ever be returned to office, becomes clearer and clearer when their policies are compared with the stability and prosperity engendered by the Labour Government.

Mr. Oliver Letwin: It is extremely useful for the House to debate public expenditure and the economy, and the fascinating speech of my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) provided evidence of that—it was an education for us all. I hope that the Economic Secretary will either tell us that she will induce the Leader of the House to provide another such occasion or let us into the secret of when there will be one. Clearly, we should have such debates more often.
The debate occurs against a certain background. It centres on certain facts; the causes, the concealment and the effects of those facts; and certain contrasts. What is that background? My hon. Friends the Members for Reigate (Mr. Blunt) and for Boston and Skegness (Sir R. Body) made it quite clear: over 18 years, the economy experienced probably the most radical micro-economic surgery in economic history that has ever been experienced by any sick patient. It created not only


a golden economic legacy, but a fundamentally sound economy. [Interruption.] Labour Members are regaling themselves with amusements, as I rather imagined that they would, so they will be interested to know that that view is propagated by the organisation that is well known to be a mere proponent of the Conservative party—the Organisation for Economic Co-operation and Development.
Now we move on to certain facts, which have come out well in the debate. We owe a great deal to the hon. Member for Kingston and Surbiton (Mr. Davey) who, in an interesting speech, spelt out clearly what has happened in respect of the well-known vast increases in spending on health and education. In a number of speeches, my hon. Friends brought out the fact that there is an extraordinary contrast between what everybody believes is the case—spending on health and education is huge—and what we see in our schools and hospitals and what we hear. Why is there such a contrast? Because there has not been any huge increase in health and education spending.
Health and education spending will be broadly the same as a proportion of gross domestic product at the end of the Government's tenure as it was at the beginning and the rates of increase will be broadly similar to those achieved under the previous Government. That is why the shadow Chancellor, my right hon. Friend the Member for Horsham (Mr. Maude)—when all those matters were first being discussed and contrary to myths that have been propagated from time to time—said:
The Chancellor hopes that we will oppose his plans to spend more money on health and education, but I am going to disappoint him."—[Official Report, 14 July 1998; Vol. 316, c. 195.]
We were able to disappoint him on that score because not much more money is being spent at all, but something else is happening.

Mr. Rammell: If those expenditure plans do not amount to a great deal more than the expenditure plans of the previous Conservative Government, why were they described as reckless and unsustainable when they were introduced by this Government?

Mr. Letwin: I shall return to the reckless and unsustainable spending with a vengeance; we will get to that in a moment and the hon. Gentleman will be more than satisfied on that score.
Something else has happened and we have another fact to consider. My hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb), who gave us a classically forensic exposition, brought it out, as did my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) before him. There have been £40 billion of stealth taxes—£1,500 for every taxpayer in this country. People have had £40 billion extra of tax money taken from them; it has been popped into the Chancellor's coffers and there has been no noticeable additional spending on health and education compared with the previous position.
What has caused that apparent anomaly? The reckless and extravagant spending to which the hon. Member for Harlow (Mr. Rammell) referred: £70 a month for each person in this country—or £38 billion a year extra—will be spent on welfare by the end of the period. That has come out clearly in the debate, but the extent to which the future has been mortgaged has not. Post-dated cheques

are being issued. Growth in welfare spending creates growth in welfare spending, the more so when the incentives that it creates are misconceived—a 69 per cent. withdrawal rate has been imposed on a huge new section of the population—and people are given incentives to behave in ways that are likely to make them more, rather than less, dependent in the future.
That is the reality of the so-called "welfare reform". It is not welfare reform; it is welfare increase. It is not even welfare increase; it is spending increase on welfare, which will diminish welfare in the true sense. My hon. Friend the Member for Boston and Skegness referred to it as a set of IOUs. It is not welfare into work—

Mr. Milburn: It is torture.

Mr. Letwin: It is certainly torture. It will be torture for large numbers of taxpayers for many years to come because they will have to continue to foot the bills not just of this Administration but of many Administrations to come.

Mr. Edward Davey: I do not agree with the hon. Gentleman's analysis. If one looks at the percentage of national income that goes into tax, expenditure and borrowing, the percentage that is taken in tax is more or less the same under this Government as it was under the previous one and the percentage on expenditure is more or less the same. The only change is the percentage on borrowing, which has gone down.

Mr. Letwin: The hon. Gentleman brings me to my next point: the figures look like that so long as one relies on concealment, which has bedevilled this whole debate recently. My hon. Friend the Member for Bognor Regis and Littlehampton brought this issue out extremely clearly. I challenge any Labour Member who cares to spend a nightmare holiday on the beach to peruse the Chancellor's ghastly document—some will have done so already—and to make sense of it. It is never easy to make sense of the public accounts of any country, but no country in the world has managed to produce quite such an obfuscation and concealment. By redefining spending as not spending, by readjusting adjustments as nothing but adjustments, which turn out to be massive expenditure, and by various other obscure means, the Government have managed to concoct so devilishly cunning a scheme that even the hon. Member for Kingston and Surbiton is, unfortunately, beguiled by it.

Mr. Blunt: Even?

Mr. Letwin: I say "even", because I fear that many Labour Members would be much more easily beguiled—and have been, as their speeches all too clearly illustrated.
The effect of the disastrous logic that we face is partly short term and partly long term. The short-term effect is that, in 1997, the colossal and probably half-conscious fiscal squeeze that the Government applied to the economy in the apparent pursuit of prudence forced a downturn to occur, which the Bank of England heroically tried to diminish through its interest rate policy. Although little unemployment is being generated, that is because of the background of the colossal micro-shifts and the vast structural changes to which I referred.
What we must worry about much more than that short-term effect is the long-term effect of what the Government are doing. The long-term effect arises not only from £30 billion of extra tax on business, but from a series of extra burdens: the working time directive; the national minimum wage; the unfair dismissal regulations; the parental leave directive; and the working families tax credit. According to the Institute of Directors, all those add up to some £5 billion of additional costs to business, on top of the business tax. That is why people such as Professor Minford forecast a net long-term increase of some 800,000 in the unemployment figures due to the Government's policies. That is even more worrying than the short-term effect.

Ms Keeble: The hon. Gentleman read out an impressive list of measures, many of which have been extremely popular with the public. Which of those would he cut?

Mr. Letwin: Once the hon. Lady sees how some of those measures have been implemented and their effects over time, she will be coming to us offering suggestions of how we can deal with them when we next find ourselves in government.
There is another item on the agenda. The problem is not just the background and the causes, concealment and effects of these disastrous facts: it is the contrasts. The contrast between reality and presentation applies not only to health and education, but across the board. Many of my hon. Friends have brought that out clearly in the debate.
There is the Prime Minister's famous statement—not yet famous enough—that
we've no plans to increase tax at all.

Mr. Leslie: Income tax.

Mr. Letwin: No, he did not say income tax. In the Financial Times on 21 September 1995, he said:
we've no plans to increase tax at all.
The Prime Minister either said that at that time or he did not, or he changed his mind after that time. The fact is that the Prime Minister said it and has not done it. That is the contrast to which I am referring, and the hon. Member for Shipley (Mr. Leslie), alas, cannot get out of it.
That is by no means the end of the contrast. The Prime Minister has been at great pains, aided and abetted by his Chancellor, to make it seem that there are not all these dreadful stealth taxes that the Tories keep going on about. It was odd, therefore, that he said that
the tax burden will increase over this Parliament".—[Official Report, 3 March 1999; Vol. 326, c. 1075-76.]
There is even a contrast between what the Prime Minister tells people when he is outside the House and what he bothers to tell us when he is inside the House and is on the record, so he knows that he has to try to tell the truth.
The situation is even worse on welfare. My right hon. Friend the Member for Wells, my hon. Friend the Member for Bognor Regis and Littlehampton and several other of my hon. Friends showed the extent of the contrast between what was said about welfare and what is

happening on welfare. In addition to all the items that they quoted, I quote another: a speech again by no less a figure than the Prime Minister and to no less a body than the parliamentary Labour party in Church house on 7 May 1997. He said:
I have asked Ministers at the Department of Social Security"—
I take it that he included the right hon. Member for Birkenhead (Mr. Field), the then Minister for so-called Welfare Reform—
to look in detail at how we can make far reaching reforms that will tackle insecurity and poverty as well as reducing social security bills.
He asked the right hon. Member for Birkenhead to do that, but when he had done it, the Prime Minister got rid of him, and made sure that our welfare system would go on growing from now roughly to eternity.
That is the set of contrasts that we are dealing with. It is say one thing and do another. It is talk about long-term stability, and act to undermine the economic foundations of the restructuring that we so painfully engaged in for 18 years. It is talk about a cost-free health and education expenditure boom, and act to tax by stealth to fund welfare payments. It is talk about economic transparency, and then produce probably the least transparent and most obscure set of non-accounts that have ever been produced by any Government of this country.
That is the record. It is a record that I would be ashamed of if I were in government. It is a record that the Government still have some time to put right, at least in one respect—they probably cannot undo the rest of the damage. They could at least give us an honest set of accounts next year. They could make it possible for the nation to tell whether what I am saying is right or wrong, because they could make it possible for commentators to understand what is in the Budget statement.
I beg the Economic Secretary to make us the tiny promise that, next year, the Government will offer us a Budget statement that an ordinary, moderately intelligent person can make his or her way through, so that they can work out what is spending and what is tax, and how much adds up on one side of the sheet and how much on the other. That would be a major benefit to this country, although it would not, I admit, be a major benefit to the electoral prospects of the Labour party.

The Economic Secretary to the Treasury (Ms Patricia Hewitt): This has been an extremely interesting and well-informed debate, largely due to excellent contributions from my right hon. and hon. Friends. I am afraid that I cannot say the same for the contributions of members of the Opposition Front-Bench team. That is perhaps unkind, and I recognise that we must make allowances for the fact that it is the last day of term. It is a well-known tradition that, on the last day of term, children are allowed to bring their favourite toys to school. I think that the right hon. Member for Wells (Mr. Heathcoat-Amory) brought along his favourite speech.
As my hon. Friend the Member for Northampton, North (Ms Keeble) accurately, but perhaps also unkindly, said, the right hon. Member for Wells completely avoided mentioning the Bank of England in his opening contribution. He left that extremely important issue to the hon. Member for Bury St. Edmunds (Mr. Ruffley).


Perhaps the right hon. Gentleman did not want to be reminded—but I shall remind him—of what he said in the House on 26 October 1998, in response to an intervention from a Labour Member. He said:
The hon. Gentleman has obviously already forgotten that we voted against the Bank of England Bill on Second and Third Reading. We also argued against its provisions in Standing Committee."—[Official Report, 26 October 1998; Vol. 318, c. 39.]
Well, we do not forget, the City has not forgotten and the country has not forgotten. The fact is that, as several hon. Members pointed out this evening, the Conservative party has persistently opposed the independence that we granted to the Bank of England, and the creation of a successful monetary policy framework that is delivering the lowest long-term interest rates and the lowest mortgage rates for more than 30 years. The Conservatives are opposed to that successful policy, and their spokesman has nothing whatever to say on the subject.

Mr. Letwin: The Economic Secretary has mentioned something that was mentioned several times by her colleagues. Would she expect interest and mortgage rates to be high at a time of significant economic downturn?

Ms Hewitt: The excellent report published by the Select Committee on the Treasury on this subject rightly reflects the success that is being achieved by the removal of politics from interest-rate decisions. We are seeing that success in the fall in long-term interest rates, and in the narrowing of differentials between our interest rates and those of our European counterparts.
My hon. Friends the Members for Northampton, North and for Stafford (Mr. Kidney) both referred, in excellent speeches, to the benefits that are already being seen in their constituencies as a result of our additional investment in schools, hospitals and housing. What did the right hon. Member for Wells have to say about that additional investment? He said that the extra money was being spent on all the wrong things. All the wrong things? The money is being spent on hospitals, schools, elderly people and the highest-ever increase in child benefit for families with children. Are those, in the eyes of the present Conservative party, "all the wrong things"?
We know, and have known for some time, what the Conservative party is now against. It is against independence for the Bank of England, the minimum wage, the working families tax credit and the new deal. Now we want to know what the Conservatives would cut. Would they cut the extra spending on hospitals and on schools, the additional money being made available to elderly people, or the record increase in child benefit?
My right hon. Friend the Member for North Durham (Mr. Radice) made, as we would all expect, an excellent speech. Like many others who spoke today, I thank him and his colleagues on the Select Committee—members of all parties—for their excellent report on the new monetary police framework. The Committee is playing an extremely valuable role in enhancing the transparency and accountability of the framework.

Mr. Blunt: The Economic Secretary speaks of transparency and accountability. Will she deal with the point made so eloquently by my hon. Friend the Member

for Bognor Regis and Littlehampton (Mr. Gibb) about the questions tabled during the 1980s by the right hon. Member for Blackburn (Mr. Straw), which her Department was unable to answer when they were tabled in precisely the same form by my hon. Friend?

Ms Hewitt: I understand that the hon. Gentleman supports the independence of the Bank of England and the new monetary policy framework. I am surprised that he did not intervene to congratulate us on implementing a policy that is supported by him, but opposed by his Front Bench.
In an extremely constructive speech—it was perhaps a little long, but it was very constructive—the hon. Member for Kingston and Surbiton (Mr. Davey) referred to the new public service agreements, an important innovation in ensuring that we achieve the modernisation and results that we need from our public services. I remind him that, in December, we published in the White Paper, "Public services for the future—modernisation, reform, accountability" the first tranche of the public service agreements. They are there in the public domain for all to see—the targets that we have set for improvements in public services. They include reductions in hospital in-patient waiting lists, reductions in class sizes for five, six and seven-year-olds, and reductions in the time between arrest and sentence for persistent young offenders, who for years under the previous Government were allowed to get away with it.
The hon. Member for Kingston and Surbiton raised the Select Committee on Procedure report that was published yesterday on debates on expenditure plans. Of course, we will want to consider carefully that extremely thoughtful report and will respond to it in due course, but the report's recommendations are primarily addressed to how Parliament can use the opportunities that are already available to it, rather than a matter for the Government themselves.
The hon. Member for Boston and Skegness (Sir R. Body) raised the question of Kosovo and whether the costs of both the war and reconstruction in Kosovo and the western Balkans will threaten public finances. I assure him, as my right hon. Friend the Chief Secretary to the Treasury has assured the House on other occasions, that, because of the healthy state of public finances, there is no threat to the public finances from the demands that will be made, rightly, by reconstruction in the region.
The hon. Gentleman also raised the wider issue of the state of the public finances. He rightly criticised the record of the Conservative Administration, who, in 1993–04, raised public sector borrowing to £50 billion, the highest level that it has reached since the war. I hope that he and other Conservative Members will congratulate the Government on the fact that, in the first two years alone, they cut borrowing by £32 billion; that total net borrowing over the next five years will be lower than in any one single year in the previous Parliament; and that we are forecasting, and will deliver, current budget surpluses totalling £34 billion over the next five years, compared with a deficit under the previous Government over the previous cycle of a staggering £149 billion.
The hon. Gentleman raised in particular his fears about what would happen to the national debt. As I have said, the national debt doubled in the early 1990s under the Conservative party, but, if he looks at the projections in the financial statement and Budget report in table B6, he will find that the national debt is set to fall from a peak of over 44 per cent. of GDP in 1996–97 to under 40 per cent. this year and to under 35 per cent. in 2003–04.

Sir Richard Body: In the Budget statement, that is not the forecast. Perhaps the Minister will good enough to remind herself. The figure will go up again. It is true that there has been a small surplus in the past two years, but, as I pointed out, that was the result of a time lag following decisions by the previous Government.

Ms Hewitt: As I have already said, current budget surpluses will total £34 billion over the next five years and the national debt will fall substantially as a proportion of GDP, compared with the peak that was reached.

Mr. Gibb: The hon. Lady has trotted out the £34 billion figure that I referred to, which is the so-called current surplus over the next five years—1999 to 2003–04. Why has she chosen five years? Why not six years? Why not four years? What is the reason for the five-year period?

Ms Hewitt: It is the lifetime of this Parliament, and a perfectly reasonable period to choose.

Mr. Gibb: Will the hon. Lady give way?

Ms Hewitt: No, I shall not give way again. I am sorry, but this has been a lengthy debate, and I should like to do justice to the many speeches that we have heard.
My hon. Friend the Member for Harlow (Mr. Rammell), in a thoughtful speech, stressed again the improvement in public finances, the investment in public services, the achievement of economic stability and—underlining the point made by the Select Committee on the Treasury—the success of our new monetary policy framework in avoiding recession despite the world financial crisis.
The hon. Member for Reigate (Mr. Blunt) raised the issue of health spending. I should remind the House of the facts on health spending: over the comprehensive spending review period of 1998–99 to 2001–02, there will be real annual average growth of 4.7 per cent. in national health service spending; and, over the entire Parliament, there will be a real annual increase of 3.7 per cent. We should compare those percentages with an annual increase of 2.5 per cent. in the previous Parliament, and with an increase of a mere 3 per cent. in the 18 years of the previous, Conservative Government. On both measures, therefore, the Government are providing a significantly higher annual real increase in funding for our hospitals and the national health service.
My hon. Friend the Member for Stafford, in a typically well-informed and excellent speech, raised the extremely important issue of separating capital and revenue accounting, and stressed the importance of doing so to ensure that we achieve the levels of long-term investment that the economy needs. He was absolutely right on those points. I simply draw his attention to the Government's plans to introduce resource accounting and budgeting, which will ensure that, in the public sector, we do indeed have proper accounting for both capital and revenue.
For much of his speech, the hon. Member for Bognor Regis and Littlehampton seemed to be suffering from amnesia—he quite clearly forgot the 22 tax rises under the previous, Conservative Government. Like other Opposition Members, he also mentioned social security spending. It is worth remembering that, under this Government, social security spending will rise by a mere 2 per cent. annually—which is half the level that was achieved by the previous Government.
In contrast to the previous Government—who preached an end to the dependency culture, but locked millions of people into dependence on means-tested benefit—we are reforming the welfare system, so that it springs people out of the trap of unemployment. The success of our policy is demonstrated by the contribution that welfare to work is making to the fact that 400,000 more people are employed in the United Kingdom now than were employed at the time of the previous general election.

Mr. Blunt: Will the hon. Lady give way?

Ms Hewitt: No, I shall not give way, if the hon. Gentleman will forgive me. I have been generous in giving way, but we are running short of time.
My hon. Friend the Member for Hornchurch (Mr. Cryer) rightly mentioned the years of Conservative neglect of public transport—a neglect that we are now having to make good.
Finally, the hon. Member for West Dorset (Mr. Letwin), in a tortured speech, referred not only to health but to education. I remind him that, under the Labour Government, in the three years of the CSR period, there will be a 5.1 per cent. annual real increase in investment in our schools; and that, in the whole period of 1996–97 to 2001–02, there will be a 2.9 per cent. real annual increase. The final percentage should also be compared with the 1.5 per cent. real annual increase under the previous, Conservative Government—demonstrating that we have virtually doubled real annual growth in the United Kingdom's education budget. It is a tribute to our commitment to education, education, education.
The Government are determined to get rid of the boom and bust of the Conservative years. We are delivering low inflation, the lowest interest rates for 30 years, rising employment and a reform of the welfare system that is delivering opportunity—

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

PETITION

Cancer Services (Colchester)

10 pm

Mr. Bob Russell: I wish to present a petition in the name of my constituent, Mrs. Susan Brooks, and signed by approximately 25,000 residents of Colchester and elsewhere in the county of Essex concerning cancer services. For the third time in 10 years, the local cancer services are the subject of a review.
The petition states:
The petition of the Evening Gazette, published in Colchester, and residents of Colchester and surrounding areas of Essex
Declares that we are opposed to the closure of cancer treatment services in Colchester.
The Petitioners therefore request that the House of Commons urge the Secretary of State for Health to do all in his power to ensure that cancer treatment services continue to be provided in the town and that a cancer centre of excellence be built in Colchester.
And the Petitioners remain, etc.

To lie upon the Table.

House Procedures (Reform)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert Ainsworth.]

Mr. Peter Bradley: It is a privilege—if I may use that word—to have the last hurrah of the summer. I see that Opposition Members have stayed behind for this Adjournment and I do not know whether I should disappoint them now or later, but my speech contains no mention of sex, drugs, rock and roll or Michael Ashcroft. I have no wish to keep hon. Members from the beach or the Minister from exercising his right to roam. However, I wish to make some serious points about the way in which we conduct our business in the House.
Although our traditions are important, they too frequently oppress originality of thought, expression and debate and limit our ability to serve—and remember that we serve—our constituents as effectively as we should.
I have contemplated initiating this debate almost from the day that I entered the House and for the past two years I have effectively bitten my tongue and suppressed my growing indignation. Had I spoken before, my views might have been uncharacteristically ill-considered and intemperate, but now, as all will recognise, I have matured with experience on the Back Benches and am widely recognised as a man of sound judgment who commands respect from all sides of the House as a consensus politician. I believe, therefore, that the time is right to state my views.
Some of my early frustrations in the House have certainly dissipated. For example, I am not sure that I would support the introduction of electronic voting in the House. Although voting in the Lobby does not guarantee that right hon. and hon. Members know what has been debated or what they are deciding, it gives them access to Ministers and that is an essentially democratic experience for them and for us. It provides the opportunity—which I have taken on many occasions—to raise important issues on behalf of constituents.
Other reforms are long overdue, however, and I find the pace of change painfully slow. I ask myself frequently what the Modernisation Committee has achieved. Thursday morning sittings are not much of a breakthrough and certainly offer no solutions to the late night sittings and the early morning Committees that mean that exhausted Members of Parliament are increasingly detached from family life and are often too shattered and too drained to do the work that they need to do on behalf of their constituents.
I grant that there have been advances and I particularly welcome the break with the 500-year-old tradition, dating back to the days of Henry VII, of printing Acts of Parliament on vellum made from animal hide. I believe that that break with tradition represents a great leap to freedom for the goat, but not much of a step forward for mankind.
This is a radical and reforming Government. Yet it is accountable to a Parliament which is top-heavy with tradition, cloaked in almost a masonic ritual and bound by labyrinthine procedures so complex, convoluted and arcane that only men in wigs are masters of them.

Mr. Tony McNulty: Leave the hon. Member for Lichfield (Mr. Fabricant) alone.

Mr. Bradley: With some honourable, and less honourable, exceptions.
There are procedures in this House that are so deliberately mysterious and obtuse as to be impenetrable to the majority of hon. Members—and, more importantly and more damagingly, to the public whom we serve. That is a serious point. Turn-outs in local and European elections are down because people, for whatever reason, have become disengaged from the democratic process. They love the pageantry and tradition of Parliament, but do they understand it? Does it speak to them, or for them? Do they own it, and own this institution?
It is a disgrace that the public are so unwelcome in this place. When they visit, they must queue outside in the wind and rain, and when they enter, there are precious few catering facilities open to them and few toilets for them to use. This is their Parliament—this is where they send us to make their laws. This is not our place. None of us was born to rule. We are sent here on licence and for a purpose—to serve our constituents, to interpret their aspirations, to meet their needs and to speak for them.
But even the language used in this place is a private language. In this Chamber, no one has a name, and we must all refer to each other as hon. or right hon. Members when the large majority of us do not believe that of ourselves, far less of each other. I have worked out that the longest form of address in this House would be for a Privy Councillor who was a commissioned officer, a Queen's counsel and the son of a duke, marquis or earl. He would be the right hon. gallant and learned noble Lord, the Member for Folderol.

Mr. Patrick McLoughlin: He could be a reverend as well.

Mr. Bradley: I am grateful for that intervention. I would submit that what I have described is not a form of address, but a filibuster. A former right hon. Member of this place, not content with having a title and a double-barrelled name—Sir Reginald Manningham-Buller, who adorned this place from 1950 to 1962—had to be referred to as the right hon. learned and gallant Gentleman, the Member for Northamptonshire and the Soke of Peterborough—or presumably just as the Soke of Peterborough for short. [Interruption.] Conservative Members knew him better than I do.
I spoke of a private language. This is a place where we may abolish the House of Lords, but not mention it in our proceedings; where we pass laws expressed in a language of statute which few of us can penetrate and which would be meaningless to our constituents for whom those laws are framed. I would submit that that is nonsense—but it does not have to be that way.
In the Scottish Parliament—born of centuries of history but unburdened by them—they meet in the morning and they finish their business in the afternoon. It has agendas that even I can understand, and it allows Members to call each other by name without necessarily ensuring that they are two sword-lengths apart—and the world north of the border simply has not ended.
Why can we not speak the language of our constituents when we claim to speak on their behalf? We wander corridors in the Palace of Westminster and sit in Committee Rooms hung with second-rate portraits of forgotten grandees who frown down upon our deliberations. Why do we not tear them down and replace them, for example, with views of our constituencies and of our constituents—views of life in contemporary Britain? That would inspire us more purposefully than the eminent Victorians who currently hang there in suspended animation.
Our detachment from the outside world is both insidious and dangerous. There are men in this place who have never been properly exposed to the harsh realities through which their constituents too often have to live—sometimes because of what we do here.
I call it the oak-panelled syndrome. Men born into oak-panelled manor houses, who attend oak-panelled prep schools and oak-panelled public schools, graduate to oak-panelled Oxbridge colleges or to Sandhurst, then go to oak-panelled inns of court and clubs in St. James's and make their progress from the Commons to the Lords, until they are interred in an oak casket.
Too many conceive of this place as a club, defined as much by those who are excluded as by those who are admitted. That exclusivity is pernicious and often nasty. I remember with shock and shame when the Lawrences were sitting beneath the Gallery and Opposition Members were making mischief about the writ for the Newark by-election; when my hon. Friend the Member for Bradford, South (Mr. Sutcliffe) sought to intervene with the Chair to move to the statement on the Lawrence inquiry, you, Mr. Deputy Speaker—I mean no offence to you—said:
I say to the hon. Gentleman that there is no one in the Chamber apart from right hon. and hon. Members."—[Official Report, 29 March 1999: Vol. 328, c. 753.]
That was not only insensitive but demonstrably untrue. It is an Alice in Wonderland sense of reality so distorted that we see only ourselves here. That is to our shame.
Exclusivity is not limited by background or political persuasion. Just as it corrupts our relations with the outside world, a seductive but unhealthy exclusivity exists between hon. Members. So arcane are the rules and procedures of the House that one needs to have been here for at least 30 years to have mastered them. Those who have—Members and Officers alike—constitute a club within the club; an institution within the institution; an establishment within the establishment.
That establishment transcends political differences. No matter how radical or opposed to privilege hon. Members may profess to be, they use their knowledge of the procedures to their own advantage and too frequently to the disadvantage of others. Why should those who, simply because of their longevity or long service here, have spoken many times before, be allowed to speak many times again, before a younger and newer Member of Parliament is allowed to contribute ideas, energy or enthusiasm to the debate?
I was fortunate enough to be called to speak on the first day of Second Reading of the House of Lords Bill, but I lost count of the number of my hon. Friends who had spent time considering what they wanted to say and researching and preparing their speeches, and then spent two days in the Chamber without being called. That is a waste of time and energy. They could far more usefully have spent that time serving their constituents. There is a need for more equity in the arrangement of our debates. There is simple common sense in at least letting hon. Members know whether they are likely to be called. That would refresh and improve the standard of debate.
Life in the House is improbable, but I have discovered that death is impossible. Black Rod may batter at our doors, but the grim reaper does not have an official pass. When, sadly, a Minister in the previous Government died at the Dispatch Box, Hansard records that he ceased in mid-sentence, and marks his demise as "Sitting suspended." If the four horsemen of the apocalypse were to gallop headlong into the Chamber, breathing fire and brimstone, I have no doubt that a Conservative Member would have the presence of mind to seize a collapsible top hat and cry "I spy strangers." Those words would no doubt be inscribed on vellum and published in Hansard shortly before the world ended.
Reform is overdue. One reform was suggested to me this afternoon. I know that Conservative Members, in particular, like conspiracy theories involving politicians and journalists, but I believe that we should allow journalists access to the Terrace. That would mean that, when we plotted and conspired with them, at least they would be able to buy a round.
I am a great respecter of tradition, but we are weighed down with it in the House and that is not good for us. It does not help us to serve. It prevents the House from working as effectively, efficiently and equitably as it should.
The Government have a radical, modernising constitutional agenda, which has all but bypassed Parliament, and that is wrong. The Modernisation Committee must be bolder and try harder; otherwise, as we lurch into the 21st century, it is in danger of dragging us kicking and screaming into the 19th. I hope that my hon. Friend the Minister can be more radical when he replies.

The Parliamentary Secretary, Privy Council Office (Mr. Paddy Tipping): To debate reform of procedure at this late hour and with the school holidays well under way may seem ironic. After what has been said about the conventions of the House, it is with caution that I congratulate my hon. Friend the Member for The Wrekin (Mr. Bradley) on securing this debate. Presumably he applied for it about a fortnight ago. In the meantime—last Wednesday—he demonstrated some of the merits of the House's conventions on freedom of speech. His actions were not without controversy, even though he admits to increasing maturity.
Before I address what has been said about our procedures and practices, let me remind the House that some changes have been made in the last two years. Despite what has been said, there is no longer any risk of this debate being interrupted by the apocalypse, or by hon. Members spying strangers or raising points of order while

wearing an opera hat. Neither need we be concerned that the military background of any hon. Members who seek to intervene in this debate will lead to them being referred to by the term "gallant"—the Modernisation Committee put that tradition away in the cupboard. At the same time, the precedence of Privy Councillors in debate has been dispensed with.
I understand what has been said about the conventions of addressing the Chair, referring to other Members as honourable and referring to their constituencies rather than surnames. Personally, I do not get enough opportunity to use the word "Bradley" in this House. My colleagues in the Ministry of Defence can say the word "Bradley" when they talk about military tactics and vehicles. Ministers at the Department for Education and Employment, when answering the frequent debates on devolved theories of the metaphysical basis of absolute idealism, may invoke the memory of the philosopher Francis Herbert Bradley. Even my hon. Friend the Minister for Sport may talk about Bill Bradley, who played basketball for the New York Knickerbockers before becoming Democratic Senator for New Jersey.
It is strange that we can now call Sebastian Coe by his real name since he ceased to be the hon. Member for Falmouth and Camborne. However, that other Olympic runner must remain the right hon. and learned Member for North—East Fife (Mr. Campbell).
As hon. Members will know, others have tried before to reform some stranger aspects of this place. Richard Crossman tried to abolish the Clerks' wigs. His diary records that
I even got the Cabinet to grant the wish of the Clerks at the Table to have their wigs abolished—despite the Prime Minister's proposal that they should wear them during Question Time and take them off at 3.30 pm.
In the event, the motion to abolish the wigs fell because the Opposition did not support the change.
My hon. Friend the Member for The Wrekin—as I call him more in affection than by tradition—has fallen foul of these conventions from time to time. His political career nearly came to an untimely end on 1 February this year when he said:
The hon. Gentleman misses the point. The point is that in your election guide in 1997, your party made great play of the fact—
At that point, the Deputy Speaker called him to order and said:
The hon. Gentleman should use the correct form of address. He is addressing me at the moment.
To which my hon. Friend replied:
Thank you, Mr. Deputy Speaker. The conventions of this House require attention, like the conventions of the other House."—[Official Report, 1 February 1996; Vol. 324, c. 674.]
My hon. Friend recovered later when he described the Opposition spokesman on constitutional matters—the hon. Member for Woodspring (Dr. Fox)—as the Scarlet Pimpernel:
They seek him here, they seek him there, but they cannot find him anywhere".—[Official Report, 1 February 1999; Vol. 324, c 666.]
That remark was in the highest traditions of invective in the House—it amused all present and left the victim uncertain whether to feel flattered or insulted.
The convention that remarks are addressed to the Chair is not unique to this House and its advantages are well known. Apart from avoiding overly personal remarks,


it avoids ambiguity about who is being addressed. In a packed House such as tonight's, confusion would easily arise if my remarks were not addressed to the Chair.
To many new Members, it seemed old-fashioned that Members were referred to not by name, but by constituency. Apart from anything else, it involved learning not just the names and faces of fellow Members but also constituency names—not all of which are as distinctive as The Wrekin or Sherwood. I recently heard the Under-Secretary of State for the Home Department, my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth) refer to the Member for "Easter Island"—what a treat it would be to represent such an exotic place.
A senior Member put all this into context for me when he said:
I wish to make one point about our practice of calling hon. Members by their constituencies rather than by their names. I have always been proud to be the Member of Parliament for Ashton-Under-Lyne. It is my constituency and I am not here because I am myself, but because I represent the people of my constituency. It would be a retrograde step if we were to abandon that practice."—[Official Report, 13 November 1997; Vol. 300, c. 1072.]
The third strand of our conventions is wording—is another Member hon. or right hon. or a Member or a Friend? I do not recall any hon. Member being called to order for omitting the "hon.". We have all tripped over whether a particular Member is "right" as well as "hon." or whether to say "Friend" or "Member". I am told that in the House of Lords, peers refer to extended relatives who are also peers as "my noble kinsman". It would give us all a great deal of pleasure if my hon. Friend the Member for Leeds, Central (Mr. Benn) described my right hon. Friend the Member for Chesterfield (Mr. Benn) as his "right hon. kinsman". Perhaps we should not encourage such familiarity, given the record number of Members with a spouse in the House. Who knows where such intimacy might lead?
When the House resumes in October we will have a debate on the procedural consequences of devolution, and will be able to compare procedures in the devolved legislatures with those operated here. Some of us may envy the opportunities that the Scottish Parliament and the National Assembly for Wales have had to start with a clean sheet. How different things might be if we could start again from scratch. We will be able to watch how the new procedures in Edinburgh and Cardiff work in practice, and there will be lessons to learn and new methods to copy. We should not be afraid of trying to identify good and improved practice elsewhere or of considering its introduction here.

Mr. Paul Tyler: The Minister is replying engagingly to an engaging speech by the hon. Member for The Wrekin (Mr. Bradley). Will he address one point? The hon. Gentleman was critical of the Select Committee on Modernisation, but was guilty of a misunderstanding. The Committee has made serious proposals that deserve the attention of the House, but it has run into extreme difficulty among the dinosaurs, particularly those who are part of the usual channels.

The House must decide on the modernisation of our procedures rather than allowing the Opposition or the Government to do it.

Mr. Tipping: The autumn will bring experimental sittings in Westminster Hall, allowing four more Back Benchers' debates a week. It will also enable three dozen more Select Committee reports to be debated each year. Refinements will be needed as we learn how those sittings work. It will be interesting to see whether the semi-circular layout of the Grand Committee Room encourages a different atmosphere and more informal style of debate.

Sir Patrick Cormack: I wish the hon. Gentleman a good recess but does he agree that the only modernisation or experiments that count are those that bring more life back into this Chamber?

Mr. Tipping: The hon. Gentleman sheds light with all that he says. I read his columns with much interest. The task before us is to encourage the Westminster Hall experiment but ensure that the prime focus remains in this Chamber.

Mr. Andrew Mackinlay: Will my hon. Friend give way?

Mr. Tipping: I am not going to give way any more.

Mr. Mackinlay: I am a kinsman.

Mr. Tipping: As my hon. Friend is a kinsman, I give way.

Mr. Mackinlay: The real radical changes that are required involve not the cosmetics of wigs and silk stockings but whether we can make the Chamber able to scrutinise the Executive and make them accountable to this place. That is what has been eroded over many years, not just by this Government, and it should be repatriated by a radical Government to this place.

Mr. Tipping: As my hon. Friend knows, I am keen to give Back Benchers an opportunity to raise and pursue issues, as he just did so vigorously. The Westminster Hall experiment will give us an opportunity to do that but we can do far more.
I am delighted that the end of this year will see stage 1 of the reformed House of Lords, if all goes to plan. We can only speculate on the effect that the departure of 90 per cent. of hereditary peers will have on that place. The removal of the hereditary element will be the most dramatic form of modernisation of our Parliament, a truly radical reform of our procedures of which we can all be proud.
We must recognise that over the past two years several improvements have been made in our procedures. The work of Select Committees in pre-legislative scrutiny has been widely welcomed. My hon. Friend the Member for The Wrekin played an important part in examining the draft Freedom of Information Bill as a member of the Public Administration Committee. When that and other draft Bills come to the House in their final form, we will all benefit from greater scrutiny. The quality of the eventual Acts of Parliament will be all the better.
As part of the process of improving the quality of legislation, we have also published new explanatory notes setting out the purpose and implications of each Government Bill, giving a detailed commentary on each clause. What is more, they are written in a language that we can all understand.
I talked earlier about getting rid of the term "gallant", and the Modernisation Committee has done that. It has done other things. The report on conduct in the Chamber published in March last year talked about greater flexibility in time limits on speeches. Tonight, we had a 15-minute rule on speeches. We relaxed the rules on quotations from other proceedings. The farce of opera hats and spying strangers has gone. The scrutiny of European documents has been extended as promised in our manifesto.
One reform that was examined but not proceeded with was electronic voting. The Modernisation Committee—I think that this was the point of the hon. Member for North Cornwall (Mr. Tyler)—consulted all Members but none of the options commanded the support of more than 13 per cent. of those who responded. Despite what was said tonight, I think that we will eventually return to that.
Only last week, the Modernisation Committee reported on how the new arrangements for Thursday sittings have worked and concluded that on the evidence that it had received, the balance between work in Westminster and in our constituencies had been maintained. Its report conclusively showed that the topics for discussion, the substance and the extra time available constituted a useful and radical step forward.
In closing my remarks, I turn to an annual procedure and tradition—the summer recess. It will be a time not only for rest but to address the concerns of all our constituents, who live in the real world. More importantly, it gives us time to reflect and formulate proposals for change. Our procedures have changed, and I anticipate that they will continue to do so. The rate of change is in our hands. With that, I wish you, Mr. Deputy Speaker, the House and its staff and all my colleagues an enjoyable break.

Mr. Deputy Speaker (Sir Alan Haselhurst): I am sure that I reciprocate the Minister's final remarks.

Question put and agreed to.
Adjourned accordingly at half-past Ten o'clock.